Bitcoin is marching north toward record highs once more, having shown resilience in the face of a rallying U.S. dollar in recent days.
“While many were concerned about the USD strength and a turbulent macro market, BTC has continued to break recent highs,” Matthew Dibb, COO and co-founder of Stack Funds, told CoinDesk. “We believe the risk-off correlation between these markets is slowly unwinding, and the cryptocurrency could challenge record highs.”
The Dollar Index, which tracks the greenback’s value against major currencies, jumped 1.21% last week as rising U.S. Treasury yields and losses in the stock market boosted haven demand.
However, despite the dollar charting its biggest weekly gain since October, bitcoin jumped over 12% in the same period. The top cryptocurrency was last seen trading above $54,170, representing an 8% gain over 24 hours, and with a market capitalization that has now returned over $1 trillion, according to CoinDesk 20 data.
A convincing move above resistance at $52,666 has put within reach the record high of $58,332 hit on Feb. 22.
“There are other positive signs on the technical chart,” Patrick Heusser, head of trading at Swiss-based Crypto Finance AG, said, while drawing attention to a breakout above the Ichimoku cloud red line – a technical analysis tool used to help identify support and resistance levels and other essential information such as trend direction and momentum.
According to Heusser, the bitcoin market has witnessed positive structural changes over recent weeks that would pave the way for a more sustainable move to lifetime highs. The futures premium has dropped, alongside continuously increasing futures open interest, and spot and futures trading volumes, he told CoinDesk in a Telegram chat.
Futures listed on major exchanges are trading at a considerably lower premium to spot market prices compared to the record spread seen in mid-February when bitcoin reached new highs above $58,000. The peak premium represented excess bullish leverage, which has been cleared by the pullback to sub-$50,000 seen at the end of last month.
Futures open interest, or the number of open positions, jumped to 334,328 BTC on Monday – the highest level since Feb. 19 – having dropped along with prices in the second half of February.
A rise in prices alongside an uptick in open interest is said to validate an uptrend. Meanwhile, a price drop is said to be temporary if it is accompanied by a decline in open interest. That’s what happened during bitcoin’s recent correction to $43,000.
And lastly, blockchain data shows holding sentiment remains strong as ever, with the balance held on exchanges continuing its uninterrupted decline last week with an outflow of 35,200 BTC.
With key events such as Federal Reserve’s rate decision due next week, Dibb foresees some price turbulence ahead of a possible breakout above $60,000.
At the Federal Reserve’s policy meeting March 16-17, Chairman Jerome Powell is expected to reaffirm his pro-stimulus stance. Traders, however, will have an ear out for his comments on rising bond yields. Powell recently refrained from sounding too worried about the turmoil in the bond market. However, an unchecked rise in yields may force him into action.
Heusser, meanwhile, has some concerns the bitcoin order books are currently skewed to the sell side. However, he remains confident these offers will be absorbed by strong inflows.
“We have seen this before, and continuous market spot buying (mainly on Coinbase) made it possible for the price to go up,” Heusser said.
The cryptocurrency may still see losses if the stock market suffers a big drawdown on a continued rise in yields, if any. Heusser, however, does not expect a drop below $47,000.
“During consolidation, we built a solid liquidity pool at around $47K, which I believe should be the local bottom until we reach a new all-time high,” he noted.