It was a rough week for the cryptocurrency market, mainly due to the collapse of the Terra ecosystem and its ripple effect on the prices of bitcoin (BTC), ether (ETH) and altcoins, plus the panic sale that occurred after stablecoins lost their share. peg to the US dollar.
The bearish headwinds for the cryptocurrency market have been building since the end of 2021, as the US dollar gained strength and the US Federal Reserve indicated that it would raise interest rates during the year.
According to a recent report from Delphi Digital, the DXY’s 14 – month RSI has now “crossed the 70 mark for the first time since it rose in late 2014-2016.”
This is notable for “stronger dollars ~ 78% of the time over the next 12 months” in 11 of the 14 cases where this has happened in the past, suggesting that asset difficulties may worsen. .
On average, the DXY gained about 5.7% after its RSI rose above 70, which, according to a May 13 reading, “would push the DXY index straight from 111, the highest level since 2002.”
Delphi Digital said,
“Assuming the correlation between DXY and BTC remains relatively strong, this would not be good news for the crypto market.”
Bitcoin is in a key zone for price reductions
Taking a broader view, BTC is reiterating its 200-week exponential moving average (EMA) near $ 26,990, which “has historically acted as a key area for price reductions,” according to Delphi Digital.
Bitcoin continues to exceed its long-term weekly support range of $ 28,000- $ 30,000, proving to be a strong support zone during the recent market turmoil.
While many traders have been panicking over the past few days, Pantera Capital CEO Dan Morehead has taken a contrarian approach declaring“It’s best to buy when the price is much lower than the trend. Now it’s one of those times.”
Morehead said,
“Bitcoin is either ‘cheap’ or cheaper compared to the trend only 5% of the time since December 2010. If you have the emotional and financial resources, go the other way.”
Delphi Digital, however, offered a word of warning, noting that “the best opportunities or ‘markets’ in the market are not around for long.”
Given that BTC has long been trading in the $ 28,000- $ 30,000 range, “the more we see price building in these areas, the more likely it is that there will be further movement.”
In the event of a further decline, the next areas of support are “weekly structure and volume structure at $ 22,000 to $ 24,000” and “recovery from the 2017 full-time high of $ 19,000 to $ 24,000”.
Delphi Digital said,
“The first signs of capitalization are beginning to be felt, but we cannot say at this time that we are approaching the point of maximum sentence.”
The views and opinions expressed herein are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every investment and every trading operation involves risk, you should do your own research before making a decision.
