Bitcoin dropped by 16.33% on Monday, almost step-by-step closer to recording its worst single-day performance since March 2020. However, the leading cryptocurrency experienced a recovery from its intraday low of $ 27,678.

 

This level was one of the most important reminders that the Bitcoin price rally, which continued with an explosive increase from $ 3,858 in March to $ 34,810 in January, was completely different from the bull run of December 2017.

Here, each drop attracts a new wave of buyers. This confirms that the cryptocurrency can continue to rise until 2021.

Here are three reasons for the BTC / USD pair to rise above $ 34,000 to retest its previous record this week.

 

More corporate capital to Bitcoin

The last 24 hours have witnessed two major financial firms confirm their risks in the Bitcoin market. Three Arrows Capital, a Singapore-based hedge fund manager, filed a filing with the US Securities and Exchange Commission (SEC) for more than $ 1 billion in Grayscale Bitcoin Trust.

Meanwhile, New York-based investment management firm SkyBridge Capital invested $ 25.3 million to launch the SkyBridge Bitcoin Fund LP. The company’s press release stated that they are planning to provide “an institutional-level tool to drive big wealthy investors to Bitcoin” through its new product.

The news has provided more evidence that institutional capital is entering the Bitcoin industry not only to speculate but also to build reliable and regulated investment infrastructures.

“We believe Bitcoin is at the forefront as an exciting new asset class,” said Anthony Scaramucci, founder and managing partner of SkyBridge. With the enterprise quality custody solutions available today, we believe the time is right to allocate capital and give our customers access to digital assets. ”

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Depreciation of the dollar

Bitcoin is now trading against the US dollar in the medium and long term. This becomes clear when we watch the performances of both assets in 2020. While the dollar closed the year almost 7 percent lower against the large basket of foreign currencies, Bitcoin rose over 300 percent.

US Dollar Index, DXY, Greenback

The dollar is now falling equally this week and the rest of 2021. It opened the first trading day of the year in the negative zone and fell against the main and emerging market currencies. Analysts again claimed that the dollar’s decline confirmed the expanded demand for more risky assets since March 2020.

The same month saw the Federal Reserve launch the endless bond buying program to protect the US economy from the coronavirus epidemic. The central bank also kept reference loan rates close to zero, a policy that remains intact as it enters 2021.

Bitcoin, on the other hand, served as a hedge against low bond yields and the depreciating US dollar. The cryptocurrency hopes to fulfill the “anti-fiat, anti-inflation” narrative as analysts predict that the dollar will drop further. Morgan Stanley’s strategist James Lord is one of them.

“The dollar needs to fall further, thanks to the Fed’s average inflation targeting framework, the widening trade deficit and better global growth,” he said on a note.

 

FED decisions

Bitcoin’s ability to maintain its short-term uptrend also depends on the forward guidance of the Federal Reserve.

On Wednesday, the central bank will publish the minutes of the December meeting. President Jerome Powell admitted last month that his office will continue to transfer cash to financial markets to avoid a deeper recession. This includes buying $ 80 billion a month in treasury bonds.

This includes purchasing $ 40 billion per month in agency-backed securities until the labor market confirms “maximum employment”.

Pigeon guidance could allow Bitcoin to return to $ 34,000 in the second half of the week.

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