The US dollar is starting to weaken once again as sellers are pushing the US dollar index (DXY) lower, which could strengthen the momentum of Bitcoin (BTC) in the near term.
Alternative assets like Bitcoin and gold are priced against the dollar. Therefore, when the DXY starts to fall, it often causes BTC to rally against the dollar.
The dollar’s share of global reserves is falling rapidly
According to Holger Zschaepitz, a market analyst at Welt, the US dollar’s share of global reserves is rapidly declining as countries like Russia are pursuing a de-dollarization strategy and turning to gold.
When the pandemic was declared in the first quarter of 2020, demand for the dollar increased as investors fled to cash because it is the world’s reserve currency.
However, due to various factors, including the presidential elections and the negative outlook for COVID over the past year, the dollar struggled to outperform other currencies such as the Japanese yen and the Swiss franc.
“UNRWA! Decline Dollar. While the dollar’s share of global reserves initially increased at the start of the pandemic, it has since declined and is now at just 59% – a 1.5pp quarterly decline and the lowest since 1995. Part of the decrease is due to depreciation, but also due to the active sale of USD. “
If the decline in the US dollar continues, there is a good chance that Bitcoin will continue to rally in April.
Historically, April has been a strong month for Bitcoin for the past ten years, posting positive gains for five consecutive years since 2016.
– Bitcoin Archive (@BTC_Archive) March 29, 2021
Additionally, Danny Scott, the CEO of the Bitcoin exchange CoinCorner, said that the law of averages places Bitcoin at $ 83,000 in April. He wrote:
“The Law of Averages gives #Bitcoin a target price of $ 83,000 for April. 10-year average in April + 51%.”
Miners seem to be hoarding Bitcoin
In addition to the macro factors favorable to Bitcoin, Lex Moskoviski, the CIO of Moskoviski Capital, noted that miners recently started increasing their BTC holdings.
In a single day, miners added 4,380 Bitcoin, which the quant trader and investor described as a growing trend. He saying:
“Miners really started to increase their positions. 4,494 #Bitcoin accumulated today together. Another 4,380 #Bitcoin accumulated by miners yesterday. It looks like a trend, indeed.”
When miners sell their holdings, Bitcoin generally experiences a pullback as it can cause heavily leveraged orders in the futures market to see cascading sell-offs.
If miners are hoarding Bitcoin and hoarding BTC in the expectation that the cryptocurrency will appreciate, it reduces the likelihood of a sell-off in the foreseeable future.
In the short term, if Bitcoin sustains above the $ 58,000 support area it is still key. If it continues to consolidate above it, the chances that it will see a strong breakout above the $ 60,000 resistance level are greatly increased.