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Altcoin Season Incoming: Analyst Forecasts Further Bitcoin Correction, Signals Alts Market Upswing

Jason Pizzino, a seasoned macro investor and swing trader, has recently put forward his analysis indicating a potential pullback for Bitcoin.

His observations, informed by a deep understanding of market dynamics, suggest that Bitcoin’s prolonged rally could soon give way to further correction.

Altcoins Set To Shine As Bitcoin Undergoes Correction

Pizzino’s analysis is grounded in a comprehensive review of various market indicators. The analyst has been closely monitoring the altcoin sector, noting an accumulation of upside potential which could lead to impactful market movements, especially with the upcoming Bitcoin halving in view.

This anticipation of a shift in market sentiment is further supported by his examination of the US Dollar Index Futures chart, which shows a downward trend and recent significant drops in a single trading day.

US dollar Index (DXY) price chart on TradingView

Pizzino interprets these movements as indicators of further downside, influenced by the general macroeconomic conditions.

While Bitcoin braces for potential setbacks, Pizzino’s analysis reveals a silver lining for the broader cryptocurrency market, particularly altcoins. His study of the Total3 chart, excluding Bitcoin and Ethereum, shows a latent potential for growth in the altcoin sector.

This observation aligns with the cyclic nature of the crypto market, characterized by alternating periods of fear and greed. According to Pizzino, the market is currently experiencing one of its lengthiest stretch of positive sentiment, a trend he expects to shift in alignment with historical market behaviors.

Bitcoin’s Strong Support Zone And Emerging Altcoin Focus

In parallel, another prominent crypto analyst, Ali Charts, has identified a critical support zone for Bitcoin. Between $37,150 and $38,360, a substantial number of Bitcoin transactions have occurred, with roughly 1.52 million addresses purchasing around 534,000 BTC.

This significant level of accumulation has established a strong foundation, potentially curtailing any further decline in Bitcoin’s value below that level.

Despite the correction, Bitcoin has shown resilience in its recovery from recent dips. Although the asset is still down by 2.7% over the past week and nearly 1% in the past 24 hours, it has managed to surpass the $42,000 mark after previously falling below $41,000 on Tuesday.

Bitcoin (BTC) price chart on TradingView

However, a noticeable decline in Bitcoin’s daily trading volume, from $30 billion earlier this week to $13.6 billion, hints at a shift in investor focus towards the altcoin market. This aligns with Pizzino’s prediction and could be the harbinger of a new phase in the crypto market, where altcoins demonstrate significant rally alongside Bitcoin.

Featured image from Unsplash, Chart from TradingView

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More Gains for Bitcoin Ahead as Natixis Predicts Dollar Declines

The starting point for the Bitcoin market’s recent declines is the prospect of faster-than-expected economic growth in the United States, thanks to the extreme fiscal expansion and a recent rebound in job growth to pre-pandemic levels, which has boosted the bond yields and, in turn, accelerated demand for the US dollar in foreign markets.

But then, Bitcoin stays on its long-term bullish course, having surged by more than 1,500 percent at one point in time from its last year’s bottom on $3,858. The benchmark cryptocurrency was trading at $53,983 on Friday, still up 1,300 percent despite its recent decline.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin stays on its upside road despite the latest price correction. Source: BTCUSD on TradingView.com

More investors want to hold Bitcoin because it promises to behave as a hedge against monetary debasement and inflation. But the US dollar’s recent upswing has sapped the demand for an alternative safe-haven asset.

Data presented by Glassnode, a blockchain analytics service, showed that many high-profile bitcoin holders had realized their profits to seek cash. That represents a rotational strategy undertaken by investors, involving the capital reallocation from overvalued assets to undervalued ones.

What will happen to the US dollar?

Natixis, a France-based corporate and investment bank, thinks the US dollar would continue its downtrend after closing the previous year in losses.

The financial institution argued that rising US bond yields have so far underpinned the dollar rebound. But these long-term interest rates will need to stabilize, which, in turn, would sap demand for dollars in international markets.

“There will be an excess supply of dollars to be held by non-residents, leading to the prospect of a depreciation of the dollar once the yield spread between the United States and the rest of the world stabilizes,” noted Natixis.

“Once the dollar’s interest rate has stabilized, the only way to increase non-resident demand for dollars expressed in dollars, when it is stable expressed in the rest of the world’s currencies, is a depreciation of the dollar,” he added.

Bitcoin to $100,000?

The statements appear as bullish analysts expect inflationary woes to boost Bitcoin demand on Wall Street. Bloomberg’s Mike McGlone sees the cryptocurrency assuming the “digital gold” role to see its prices go over $100,000.

“The process of Bitcoin replacing gold in portfolios is accelerating,” wrote the senior commodity strategist wrote.

Meanwhile, PlanB’s stock to flow model, which predicts bitcoin’s future pricing based on its growing demand against limited supply, also see the BTC/USD rate between $100,000-288,000 by the end of 2021.

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Bitcoin Faces Trouble as Dollar Logs Fresh 2021 High, Researcher Warns

Key Bitcoin Takeaways

  • Bitcoin reversed its short-term downside bias after Elon Musk introduced a new BTC payment option on Tesla online stores.
  • Meanwhile, the US dollar index reached a fresh year-to-date after Jerome Powell’s congressional testimony on Tuesday.
  • One researcher warned that any further strength in the US dollar market could force Bitcoin prices lower.

Bitcoin traded higher on Wednesday after spending the previous session in losses as Tesla announced that it has started accepting the cryptocurrency as payments for its electric vehicles.

The benchmark cryptocurrency rallied to $56,666 during the early morning session in London. Traders flocked back into the market after Tesla founder Elon Musk elaborated the nature of their Bitcoin involvement, confirming that his company will not convert their BTC earnings to fiat. Before the tweets went viral, Bitcoin was changing hands for as low as $53,527.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin eyes extended upside move to retest its sessional resistance trendline. Source: BTCUSD on TradingView.com

Technically, the cryptocurrency looked at its short-term resistance trendline for a retest. It lurks near the $58,000-level. But given it constitutes a broader Descending Triangle patter, the prospect of Bitcoin’s pullback towards the lower trendline support near $53,000 appeared higher.

US Dollar Pops Higher

Headwinds for Bitcoin’s current upside move arrived from the US dollar markets. The greenback’s value against a basket of top foreign currencies—the US dollar index—reached its year-to-date high on Wednesday. A stronger dollar typically works against Bitcoin’s bullish outlook.

The index reached 92.60 before pulling back modestly. Its YTD peak coincided with the 200-day moving average, as shown in the chart below.

US Dollar Index, US Dollar, DXY
US dollar index touched a new yearly high on Wednesday. Source: DXY on TradingView.com

The US economy looks like it would recover faster than expected in 2021. Federal Reserve Chairman Jerome Powell confirmed the same in his congressional testimony on Tuesday, stating the Joe Biden’s $1.9 trillion stimulus packages should add 3 to 4 percentage points to the country’s gross domestic product.

Meanwhile, Wall Street economists expect the growth to be around 8 percent. That would mean higher sales and returns for American corporates. In turn, foreign investors will flock back into the US markets, leading to a rise in demand for the dollars.

The collateral damage, however, is inflation. If investors believe that the Fed and the US government have lost financial discipline, inflation expectations will rise, hurting the dollar, American stocks, and bonds. But Mr. Powell ensured that the Fed has tools to contain inflation should it go out of control.

Such assurances offered tailwinds to the dollar’s rise on Wednesday.

Warning for Bitcoin

Ben Lilly, a partner at Jarvin Labs and co-founder of ChainPulse.ai, said that further strength in the US dollar bullish sentiment could turn ugly for Bitcoin, which already sits atop attractive year-on-year profits to prompt cashing out behaviors out of traders and investors.

“US dollar index [is] trying to build momentum,” the researcher said. “If it breaks with authority, it may spill over into equities and crypto in a bearish way.”