coinjournal.net 2 h Reading time: ~2 m
- Bitcoin fails to confirm a reversal pattern
- Bulls fight to invalidate a head and shoulders
- Friday’s jobs report might be key for Bitcoin and the US dollar
After an explosive start to the year, Bitcoin’s price stopped advancing after meeting stiff resistance at the $30k area. For bulls, it was supposed to be just a matter of time until the resistance would give way to more gains.
But the bears did not give up. Just the opposite, considering that a reversal pattern formed in the last couple of months.
Indeed, it is not difficult to spot a head and shoulders pattern. Such a pattern forms at the end of bullish trends and traders look for the market to travel the minimum distance shown by its measured move.
In this case, the minimum distance to confirm the reversal is around $23k. Only the market did not travel there, putting into question the very reversal.
So are we in for an invalidation of the head and shoulders pattern? If so, when will bulls be in control again?
Bitcoin chart by TradingView
Friday’s NFP report is key for Bitcoin and the US dollar
It is no surprise to anyone that Bitcoin’s negative correlation with the US dollar increased lately. More precisely, since institutional investors started including Bitcoin in their portfolios, the leading cryptocurrency has become nothing more than a regular asset trading in sync with other financial market assets.
The best way to prove this theory is to examine the EUR/USD and Bitcoin price action in the past several months.
EUR/USD bottomed last October below 0.96. Bitcoin bottomed around the same date.
Next, EUR/USD rallied to above 1.10. Bitcoin rallied, too, following a similar pattern.
Naturally, it is not about the euro, but the dollar.
A negative correlation means that the two (i.e., Bitcoin and the US dollar) move in opposite directions. If they move tick by tick, the maximum level the correlation may hit is -1.
Obviously, it is not the case, as such extremes are rarely reached. But one cannot ignore that Bitcoin moves in sync with the dollar.
As such, Friday’s NFP report is key for Bitcoin and the US dollar. A miss would send the dollar lower and Bitcoin higher. Hence, bulls should watch the point that would invalidate the head and shoulders pattern –$30k.