Bitcoin Gains Capped As Supports Turn Into Resistance

Key takeaways:

Dormant Bitcoin holders moving large sums to exchanges raises concerns about long-term confidence amid growing concerns about the potential impact of quantum computing.

Strong inflows into Bitcoin ETFs failed to lift sentiment, with traders instead rotating toward fast-rising privacy coins, such as ZEC and DCR.

Bitcoin (BTC) has repeatedly struggled to maintain prices above $106,000 since early November, despite the S&P 500 sitting 1% below a new all-time high. Meanwhile, gold, the traditional store of value, has pared its recent losses and now trades just 4% below its prior record of $4,380.

Many traders say that factors unique to the cryptocurrency industry may be affecting Bitcoin’s performance, but are these serious enough to keep BTC from reaching $112,000 again?

US Dollar Index (left, red) vs. BTC/USD (right). Source: TradingView / Cointelegraph

The recent strengthening of the US Dollar Index (DXY) against a basket of major currencies reflects renewed confidence in the US Treasury’s ability to manage its fiscal challenges. When investors fear stagnating growth amid persistent inflation — a scenario often described as stagflation — the domestic currency typically weakens, as monetary expansion becomes unavoidable.

For that reason, traders often highlight the long-standing inverse correlation between the DXY and Bitcoin’s price. By contrast, the US stock market tends to benefit from a stronger dollar and lower interest rates. Reduced borrowing costs lift corporate valuations, while favorable exchange rates make imported goods more affordable when priced in the local currency.

Bitcoin reserve strategy companies. Source: BitcoinTreasuries.Net

Companies pursuing Bitcoin reserve strategies, such as Strategy (MSTR) and Metaplanet (MTPLF), have previously been among the largest corporate buyers, especially when their shares traded at a premium to their underlying assets. The mNAV multiple captures this relationship, representing the value of the Bitcoin held relative to the company’s enterprise valuation.