It was only last week that bitcoin started moving only to break the key levels $10,000 and $10,500. Earlier this week, the largest cryptocurrency went as high as $11,400 and since then has been hovering around $11k.
However, the cryptocurrency market might be about to face a big test after this resurgence. The Bloomberg Galaxy Crypto Index is approaching the 500 level which it failed to breach on the previous two attempts this year.
Additionally, the relative strength index (RSI) is also currently overbought at 80, near the level hit during the February uptrend when it hit a roadblock.
Bitcoin has surged 17% this week just as gold stalled after hitting its all-time high. The yellow metal hit a new peak this week but has since then fallen to $1,950, which could be because as Dennis Gartman said, it has become overcrowded with “too many people all of the sudden” having rushed into gold.
Additionally, there has been growing speculation that further US monetary and fiscal stimulus risks are eroding the value of the US dollar and fueling inflation.
“The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals,” re-emphasized the Fed in its FOMC statement yesterday.
In light of the ongoing public health crisis weighing heavily on inflation, employment, and economic activity, the Fed has decided to maintain the target rate unchanged in the range of 0 to 0.25%. The Fed is promising to maintain this target until
“it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”
Also, the Fed will be increasing its holdings of Treasury securities and mortgage-backed securities and will further continue to offer large-scale overnight and term repurchase agreement operations.
All of these facets can help bitcoin push higher as Ed Moya, senior market analyst at the Oanda Corporation said, bitcoin is “going to have a strong catalyst for the next move higher, because we’re still far away from the record highs,” of $20,000 hit in December 2017.
Although the 14-day RIS indicates that both Bitcoin and gold are overbought after their recent rallies, the gains recorded by the digital asset may withstand the test of time, Moya said.
“The fundamentals are starting to improve on the embracement of institutional interest into this space, and that’s probably going to provide some longer-term support as well.”