Why has the price of bitcoin increased today?
Bitcoin (BTC)'s return from a five-month low is still on the rise on July 13, with the cryptocurrency rising roughly 1.70% intraday to $58,885.
Driving this resurgence are several key factors: the German government's near-liquidation of a total of 70,000 BTC holdings and the weakening of the US dollar amid a growing deficit.
Bitcoin investors hold nearly $2.5B
The German government has approximately 9,100 BTC left after selling more than $2.5 billion worth of BTC as of June 17th. During this period, the price of Bitcoin decreased by 12.70%, followed by a significant recovery of more than 10% in the last eight days.
In contrast, institutional investors have been buying Bitcoin during local dips, according to Cauê Oliveira, an analyst with chain data service CryptoQuant.
In a July 11 Quicktake blog post, Oliveira noted a rapid increase in wallet balances between 1,000 and 10,000 BTC since early June, including when the German government sold BTC.
Specifically, the group added more than 10,000 BTC worth $5.7 billion during the period, coinciding with BTC's 23 percent price drop. This has opened up speculation that these so-called “whales” are buying bitcoin dips below $60,000.
“While many novice investors bought coins last week, especially those who bought coins one to three months ago, institutional players have gone through the biggest accumulation since March,” Oliveira summarized.
This data points to the potential downside for Bitcoin near recent market lows around $56,700.
The dollar falls to its lowest level in more than a month.
Bitcoin's gains today and recently are in line with the bearish trend seen on the US Dollar Index (DXY) chart.
Notably, the DXY—a gauge that tracks the strength of the dollar and a basket of major foreign currencies—fell 0.90% for the week to 104 on July 12, its lowest level in five weeks. The decline followed bond traders' bets on an interest rate cut in September.
DXY faced additional negative pressure from the rising US government deficit. It was up to $1.27 trillion in the year to June.
Low interest rates and high deficits can weaken the dollar as they increase the risk of credit defaults and threaten the financial health of governments, which can depreciate the currency.
A cheap currency prompts investors to seek returns in riskier assets, including stocks and cryptocurrencies.
Related: Bitcoin price hits $330K in this bull cycle – analyst
That explains Bitcoin's renewed strength despite rising concerns about the German government's BTC dumping, as well as the continued payment of more than 140,000 BTC to Matt Gox customers.
BTC Price Technical Crash?
From a technical perspective, Bitcoin's ongoing price correction appears to be part of an oversold bounce. This is evidenced by the four-hour relative strength index (RSI) falling below the recently sold 30 level—a level that usually signals a recovery is on the way.
Today's gains come from the buying sentiment near the downtrend of Bitcoin's largest triangle consolidating pattern as shown in the chart above. As a result, BTC's immediate upside target is around $59,000, coinciding with descending trendline resistance.
A clear break above $59,000 would push the 200-4H Exponential Moving Average (200-4H EMA; the blue wave) to $61,235 in July, a 4.65% increase from current price levels.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
