Bitcoin encountered resistance at $26,000 as the US Dollar Index (DXY) reached a ten-month high, marking a challenging start to the week for cryptocurrency investors.
Bitcoin’s Battle for Support
The digital currency had a rocky ride as it briefly dipped below the $26,000 support level. After a weekend of sideways trading, a sharp downturn early in the week left bulls struggling to recover lost ground.
BTC/USD 1-hour chart. Source: TradingView
Analysts are expressing caution, with concerns of a potential head-and-shoulders formation in the BTC price chart. BaroVirtual, an ambassador for the on-chain data platform Whalemap, pointed to this formation and suggested that if it materializes, Bitcoin could be at risk of falling into the $22,000-$20,000 range. This would mark a return to price levels not seen in six months.
Popular trader and analyst Rekt Capital also emphasized the importance of holding current support levels. He mentioned the possibility of Bitcoin testing the $25,000-$26,000 range and warned that if $26,000 turns into resistance, a further drop to the $22,000-$24,000 region could be expected.
US Dollar Strength Adds to Bitcoin’s Challenges
Compounding Bitcoin’s struggles is the relentless surge of the US Dollar Index (DXY), which reached 106.1, its highest level since November 2022. The DXY has seen a remarkable 6.5% climb since hitting 15-month lows in July. Historically, a strong US dollar has weighed on risk assets and the cryptocurrency market.
BTC/USD annotated chart. Source: BaroVirtual/X
Matthew Dixon, CEO of crypto rating platform Evai, noted that the soaring DXY poses a challenge to Bitcoin and other risk assets. Previously, there were hopes for a weakening of DXY strength, allowing Bitcoin and altcoins to rebound.
As Bitcoin navigates these challenges, investors are closely monitoring support levels and the impact of the surging US dollar, with the potential for significant price volatility in the coming days.