The current bull market is considered to be unambiguous merit of institutional investors who continue to invest in Bitcoin in an attempt to escape from inflation. The cryptocurrency market mostly benefits from this "cooperation" with the depreciation index.
However, at the same time, there is a tendency to increase the volatility of the coin and its dependence on the position of the US dollar, which may negatively affect the investment attractiveness of the coin.
The rise in inflation allowed the first cryptocurrency to significantly increase its capitalization and expand its influence on institutional investors. On the one hand, this made bitcoin more stable as a class asset, as stated by experts at Goldman Sachs.
The asset began to be introduced for everyday use and as a means of protection against inflation. But the major breakthrough in Bitcoin adoption was the SEC's approval of the first cryptocurrency ETF in the United States. This is the main positive in the relationship between coin and inflation.
However, at the same time, the cryptocurrency has become especially sensitive to the situation with the US dollar, which can be seen from Wednesday's situation.
The market has strengthened the relationship between USD and BTC, which resulted in the cryptocurrency establishing a new all-time high. However, the coin subsequently collapsed by 9% due to rumors about the bankruptcy of the Chinese developer Evergrande.
Such sharp collapses due to unverified rumors have not been observed on the market since the spring of 2021. The main reason why the cryptocurrency began to rapidly become cheaper and provoked losses of $700 million is the increased dependence on classical stock markets. This is confirmed by the growth of the Dow Jones indices, which reached a historic high, rising by 0.56%, and the NASDAQ index, which rose by 0.20%.
The similarity in the manner of growth was the first signal for an increased correlation, which was subsequently confirmed during the fall of American indices amid rumors of bankruptcy. Thus, BTC was influenced by the US stock markets and aggravated the local correction after reaching the maximum.
In other words, Bitcoin has received a huge flow of investments tied to the inflationary problems of the dollar. However, on the other hand, the BTC market began to closely monitor the Fed's agenda, and reactions to global financial events became sharper.
Recently, the volatility of the cryptocurrency has increased due to the excessive attention of investors to the situation with the US dollar.
With this in mind, trading the main digital asset during important news announcements against the dollar becomes especially dangerous. Retail traders who do not use BTC as a means of protection against inflation will suffer the most from such dependence, but now they are forced to closely monitor the situation around fiat.
Despite the first powerful jump in volatility over the past three months, quantitative analyst PlanB believes that digital gold can reach the $97k mark by the end of November 2021. Analysts are confident that BTC is now in the middle of a bullish trend, and the main period of growth will fall at the end of the current bull market, which will last another 5-6 months.
According to the S2F model, which still predicts the trajectory of the crypto price movement as accurately as possible, in December 2021, the cryptocurrency quotes will reach $135k, and in the first quarter of 2022, Bitcoin may reach $500k.
It will be interesting to observe the implementation of such a bold forecast, given that the US government is beginning to taper the economic stimulus program, which implies a decrease in the inflation rate. And given the lack of a spot ETF on bitcoin, there are no worthy alternatives for constant injections into the coin.
Meanwhile, BTC continues to recover after Wednesday's fall, and as of 12:00 UTC, it is trading around $64.9k. Technical indicators signal a decrease in the price within a narrow range of fluctuations. At the same time, the MACD is already moving flat, and the relative strength index and stochastic are declining within the bullish zone.
All this indicates a confident position of buyers near the first key support zone at $64.4k. When it is held, Bitcoin will begin a period of consolidation within a narrow oscillation channel. With a bearish breakdown of this milestone, the price will continue to decline and will meet support at $58.6k. The final point, where the chance of a trend reversal is aggravated, is the $53.6k mark.
