Short-Term Bounce Ahead, But $56K Dip Threatens Larger Rally

Bitcoin is currently trading above the $61k level and a small recovery could be on the horizon. However, according to analyst Josh of Crypto World, Bitcoin might experience sideways price action or a small rally, but this does not change the fact that the longer-term outlook remains negative unless it can break through major resistance levels.

Key Support & Resistance Levels

Bitcoin is currently finding support between $60,000 and $61,000, which has held up well over the past few days. If Bitcoin breaks below this support, the next levels to watch are $59,500, $58,000, and a more substantial support zone between $56,000 and $57,000.

If Bitcoin experiences a short-term bounce from its oversold levels, we can expect resistance at around $61,900 and $63,300. If the price moves higher, more resistance can be found at $64,500, and then again between $67,000 and $68,000, which is the upper resistance range where Bitcoin has been repeatedly rejected.

DXY Breakout & Bearish Impact on Bitcoin

The U.S. Dollar Index (DXY) has recently broken out to the upside, which is typically a bearish signal for Bitcoin. The DXY has formed a double bottom (W pattern), which hints at a bullish trend for the U.S. dollar. Historically, Bitcoin and the DXY tend to move in opposite directions, meaning that as the DXY rises, Bitcoin’s price tends to fall.

This negative correlation between Bitcoin and the DXY isn’t perfect, as there are times when they can move together. However, more often than not, they trend in opposite directions. Recently, as the DXY began to rise, Bitcoin’s price has seen a downward movement, which further confirms this negative correlation.

Bitcoin’s Short-Term Oversold Signal

While the DXY is putting bearish pressure on Bitcoin, a short-term positive indicator has appeared for Bitcoin: an oversold signal. This means that Bitcoin’s recent price drop has been so significant that it is now considered “oversold,” according to technical indicators like the Relative Strength Index (RSI).

When Bitcoin becomes oversold, it typically suggests that the selling pressure is overdone, and there may be a short-term bounce in price. However, this doesn’t mean that Bitcoin will enter a long-term uptrend.