Bitcoin (BTC) bulls seem firmly in the driving seat this week as the largest cryptocurrency begins Monday at near $40,000.
After climbing through much of the previous week’s trading, BTC/USD is now up 15% compared to seven days ago — what’s next?
Cointelegraph takes a look at five factors which may influence where Bitcoin heads in the coming few days.
Stocks hit records but dollar declines
Bitcoin’s ascent prior to the weekend was accompanied by a familiar scenario on macro markets.
Despite Coronavirus and its fallout continuing to wreak havoc on many economies worldwide, stock markets hit new all-time highs, with the S&P 500 closing its biggest weekly gain since last November. Oil climbed above $60 a barrel for the first time in more than a year on Monday.
The mood was buoyed the prospect of fresh spending in the United States as lawmakers looked to finalize the details of President Joe Biden’s $1.9 trillion stimulus package.
As Bitcoin proponents have consistently noted since the start of the pandemic and before, more spending means more money concentrated closer to the government and central bank — a phenomenon known as the “cantillon effect” — paving the way for continued interventions in stock markets among other areas.
At the same time, the U.S. dollar has suffered in recent days, part of an ongoing narrative which states that the world’s reserve currency will continue to decline.
The U.S. dollar currency index (DXY) abruptly fell below 91 on Monday, reversing its recent uptrend, which had begun in mid-January.
Despite mixed views over stimulus, political sources appear to be fully signed up to inflating the money supply as the only option.
“I remain concerned, as a medium-term worry, with secular stagnation, believe that fiscal policy will need to be much more active in the years ahead, and certainly share the administration’s view that policy should err very much on the side of expansion at a moment like this,” Lawrence Summers, chief economic adviser to Barack Obama, wrote in the Washington Post on Sunday.
“But these kinds of qualitative considerations do not provide a basis for judging whether $900 billion in short-term stimulus should be followed immediately by a $1 trillion, $1.9 trillion or $5 trillion measure, prior to an ultimate multitrillion-dollar public investment measure.”
As Cointelegraph often reports, DXY weakness tends to result in stronger performance on BTC/USD, though the negative correlation has noticeably diminished since September 2020.
BTC price sees best weekly close
After biding its time, Bitcoin is thus beginning to look like it could soon exit its established short-term trading zone between $30,000 and $40,000.
Signs that this is on the cards were already present — fundamentals were at all-time highs and various indicators…