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BTC/USD Forex Signal: Cautiously Optimistic About Bitcoin – 04 October 2022

The BTC/USD price has had a strong correlation with American stocks for most part of this year.


Bullish view

Buy the BTC/USD pair and set a take-profit at 21,000.Add a stop-loss at 18,500.Timeline: 1-2 days.

Bearish view

Set a sell-stop at 19,200 and a take-profit at 18,000.Add a stop-loss at 21,000.

The BTC/USD price continued to disconnect with American stocks in the overnight session. Bitcoin remained steady slightly below $20,000 even as bond yields and the US dollar index slipped and American equities jumped. It was trading at 19,600 on Tuesday morning.

Bitcoin and stocks correlation disconnect

The BTC/USD price has had a strong correlation with American stocks for most part of this year. Recently, however, this correlation has faded. For example, while the Nasdaq 100 index dropped by almost 10% in September, BTC dropped by less than 2%.

Bitcoin’s inverse relationship with the US dollar has also eased. For example, the US dollar index rose to its highest level in more than two decades as BTC consolidated. It is still unclear why this disconnect has happened recently.

A possible reason is that investors are waiting for the next catalyst that could have a major impact on Bitcoin and other cryptocurrencies. Last month, this catalyst was Ethereum merge, which transitioned the network into a proof-of-state platform.

Meanwhile, on-chain data show that activity in Bitcoin’s network has bee relatively muted. The number of new accounts created has declined while the volume of transactions has pulled back in the past few weeks.

On a positive side, data in the options market point to some purchases. Bitcoin’s put-to-call ratio has dropped to the lowest level since September 11 of this year. A low ratio usually means that more investors in the options market have a call trade. Call gives an investor a right to buy at a later date but not a obligation.

Bitcoin could also continue rising if stocks continue rising and bond yields fall. On Monday, the Dow Jones index rose by more than 500 points while the Nasdaq 100 jumped by over 2%. American bond yields also retreated.

BTC/USD forecast

The three-hour chart shows that the BTC/USD pair has been in a tight range recently. In this period, it has managed to move above the ascending trendline shown in yellow. It has also risen above the standard pivot point while the Relative Strength Index (RSI) has moved above the neutral point.

Therefore, there is a possibility that the pair will continue rising as buyers target the next resistance at 21,000. A drop below the support level at 19,000 will cancel the bullish view.

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