Bitcoin price is out of the ascending channel range
First, the possibility of Bitcoin reaching $25,000 comes from breaking out of the prevailing bearish channel range.
Notably, BTC price broke out of the range late last week, accompanied by a surge in trading volumes. The upside for the cryptocurrency also pushed the price above a confluence of resistance, which includes a psychological price ceiling of $20,000 and a 20-week exponential moving average (20-week exponential moving average; green wave) near $19,500, as seen below.
BTC/USD 1-week candlestick chart (Coinbase). Source: TradingView.com
The break of three resistance levels with strong volumes shows that traders are convinced of the extended price rally. If this happens, the next upside target for Bitcoin appears at the 200-week exponential moving average (yellow wave) at around $25,000 – a 20% rally from current price levels.
The dollar forms a “death cross”
The bullish technical outlook for Bitcoin appears on the back of a relatively weak US dollar, which has fallen on expectations that the Federal Reserve will stop raising interest rates as a result of lowering inflation.
The two assets have moved mostly inversely to each other since March 2020. As of January 16, the daily correlation coefficient between Bitcoin and the US Dollar Index (DXY), a measure of the dollar’s strength against major rival currencies, was -0.83 according to TradingView.
BTC/USD and DXY correlation coefficients. Source: TradingView
The traditional technical setup sees more losses for the dollar ahead.
Stay safe in Web3. Learn more about Web3 Antivirus →
The setup, called a “death cross,” appears when the asset’s 50-period moving average crosses below the 200-period moving average. For the dollar, the death cross is showing its weak momentum, which means that its short-term trend has been lower than its long-term trend.
DXY daily price chart. Source: TradingView
“We expect further declines in the medium to long term,” independent market analyst Crypto Ed said of the dollar, adding:
The risk should bounce back on the asset further. Or better said: I expect BTC to break out of its bearish cycle as the big run in DXY is over.”
Bitcoin price hike is not long term
Bitcoin is up 30% above $2023 so far, but the on-chain data shows that the buying trend is lacking support from institutional investors.
Related: Bitcoin Gains 300% in the Year Before the Latest Halving – Is 2023 Different?
For example, the total amount of bitcoin held by holdings of digital assets such as trusts, exchange-traded funds and other funds has fallen during the coin’s price surge in recent months, according to CryptoQuant’s Fund Holdings Index.
Bitcoin fund holdings. Source: CryptoQuant
Additionally, no unusual transactions occurred on-chain but on cryptocurrency exchanges, according to comparisons made between CryptoQuant’s Token Transferred and Fund Flow Ratio metrics.
BTC/USD vs Converted Symbol (orange) and Money Flow Ratio (blue). Source: CryptoQuant
The converted token metric shows the number of currencies converted in a given time frame, while the Funds Flow Ratio represents the ratio of currency transfers involving exchange to total currency transfers at the network level.
“Institutional investors usually want to buy quietly with OTC trading below,” market analyst MAC_D noted, adding:
“This trading has only been actively traded on the exchange, and no unusual on-chain transactions have occurred. […] Existing institutional investors have remained calm and just watched. OTC trading will be active when they expect a full turn to the upside.”
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.