Bitcoin made a new high for the year as it diverged from the US dollar’s strength
Bitcoin investors must be thrilled as the leading cryptocurrency trades close to $25k. It is a new high for the year and a significant development for Bitcoin for at least three reasons.
First, with the recent movement, Bitcoin returns for the year are close to 50%. Considering that we are only in the middle of February, that is no small achievement.
Second, Bitcoin broke the previous high while maintaining a series of higher lows. That is indicative of further strength.
Third, the recent upside came in a total divergence with the US dollar. The dollar gained after the inflation report released last Tuesday, as seen by the USD/JPY trading above 134 or the EUR/USD trading below 1.07. But Bitcoin did not follow the same path, diverged, and the price exploded higher.
All these put the recent Bitcoin rally in a positive light. Moreover, if we add that climbing close to $25k Bitcoin invalidated a head and shoulders pattern, the picture is even more bullish.
What needs to happen for Bitcoin’s rally to continue?
The chart above shows Bitcoin’s performance compared to the EUR/USD. While Bitcoin gained 49% YTD, the EUR/USD is almost flat.
Bitcoin’s rally might continue if the EUR/USD reverses its recent losses. When the EUR/USD dropped from 1.10 to 1.07, Bitcoin dropped from $24k to $21.5k. Now that Bitcoin rallied while EUR/USD did not, it might be indicative of Bitcoin leading the US dollar weakness.
Therefore, Bitcoin investors may see some more gains should the EUR/USD reverse the recent losses and move back to 1.10, which is the high for the year. If that happens, one should not be surprised to see Bitcoin trading close to or above $30k.