Bitcoin drops 2.8% as the US dollar rises

Bitcoin breaks $67,000📉

The recent weakness in Bitcoin's price, which has seen it drop 2.8% to break below $67,000, can be attributed to the strengthening US Dollar despite strong inflows into spot Bitcoin ETFs last week.

Here's a breakdown of the situation:

1. ETF Inflows vs. Price Action: Last week saw record-breaking inflows into US-based spot Bitcoin ETFs, with total net flows crossing $20 billion just 10 months after their launch. This milestone took gold ETFs nearly five years to achieve. However, Bitcoin's price has struggled to maintain momentum above the critical $70,000 mark.
2. Delayed Impact of ETF Inflows: Market analysts suggest that the sluggish price action could be due to the delayed effect of ETF inflows. Bitfinex analysts explain that ETF inflows can have a muted impact for a few days before influencing Bitcoin's spot price. They note that sustained spot market interest is necessary to push Bitcoin out of its current range-bound price action.
3. US Dollar Appreciation: The US Dollar has been climbing, buoyed by rising US bond yields and solid economic data. This strength in the Dollar is putting pressure on Bitcoin and other risk assets. The Dollar's rise is supported by: a) Robust US economic data suggesting the Federal Reserve can be patient in cutting rates. b) Investors scaling back expectations about the size and speed of rate cuts from the Fed. c) Upcoming US presidential election positioning.
4. Federal Reserve Outlook: Recent comments from Federal Reserve officials, such as Dallas Fed President Lorie Logan, indicate a more gradual approach to rate cuts. This aligns with market expectations and supports the Dollar's strength.
5. Geopolitical Factors: Escalating tensions in the Middle East are driving flows towards the US Dollar as a safe-haven asset, further contributing to its appreciation against Bitcoin and other cryptocurrencies.

While Bitcoin ETFs continue to see significant inflows, including over $1.17 billion into BlackRock's iShares Bitcoin Trust ETF last week, the immediate price impact has been limited. The market is currently caught between the bullish signal of strong ETF demand and the bearish pressure from a rising US Dollar.

Investors and analysts will be closely watching for signs of sustained spot market interest in Bitcoin, which could help overcome the current resistance and potentially drive the price towards new highs. In the meantime, the interplay between ETF inflows, US Dollar strength, and broader market sentiment will likely continue to influence Bitcoin's short-term price action. Historically October was a strong month for Bitcoin.

 

Bitcoin's price is currently testing a key support level at $70,000. It has bounced back after touching the 50-period SMA on the 4-hour chart, indicating potential support at that level. The RSI is cooling off from the overbought zone, suggesting some relief from bullish momentum, while the MACD is tightening, which could signal a potential shift in volatility. If the $70,000 support holds, a further upward move could be expected, but a break below may trigger more bearish action. Source: xStation