Bitcoin (BTC) has seen a very volatile week, as the price of Bitcoin jumped around from $32,000 to $38,500 and back toward $33,000 in a matter of 24 hours.
The initial spike to $38,500 happened in minutes after Elon Musk added #Bitcoin to his Twitter profile.
However, no follow-up of that price movement was seen on the charts as Bitcoin dropped substantially in the following hours. Currently, the $34,500 area is a significant resistance zone to break through if the market wants to sustain the bullish momentum.
Failure to break $38,000 causing dropdown
The levels that are critical to watch are highlighted in the chart above. Simply put, $38,000 must break for the rally to continue. Flipping this level for support opens the door to new all-time highs.
However, the surge couldn’t be sustained yesterday. After the $38,000 level’s failure, the $34,000 level couldn’t provide the heavily needed support for further upward momentum.
Therefore, the “Elon Musk pump” can be considered an outlier, and the general trend continues. This is a downtrend since the peak high at $42,000 that most likely will continue unless Bitcoin’s price can break through $34,500 and flip it into support.
Dollar showing strength is bad news for Bitcoin
One of the primary arguments for more Bitcoin downside would be the recovering U.S. Dollar Currency Index (DXY). This index shows a potential bottoming formation as a bullish divergence is seen at the significant 90-point level.
After this, the bullish divergence will be confirmed through a higher low, indicating that more upside is likely.
Remarkably, the previous relief rally on the DXY Index in September caused a 20% correction for Bitcoin. However, since that relief rally, the DXY Index has shown massive weakness, one of the significant variables for the enormous increase of Bitcoin’s price to $42,000.
However, February isn’t the best month…