Researchers Link Cryptocurrency Market Risks to the US Dollar

The price of the leading cryptocurrency remains stuck between support at $116,000 and resistance around $120,000. Ethereum’s momentum is also waning as it approaches the psychological mark of $4,000, according to analysts at QCP Capital.

In their view, there is a strong likelihood of new all-time highs in the medium term, driven by institutional capital inflows and positive regulatory changes.

Analysts noted that companies like Strategy and SharpLink Gaming continue to raise funds to purchase Bitcoin and Ethereum, indicating long-term confidence in the asset.

The total daily net inflow into ETH-ETF stands at $218.64 million.

However, in the short term, experts urged caution. The market is reacting weakly to positive news, including the adoption of crypto-friendly legislation in the US and progress in the ETF space. A lack of growth amid good news often signals market exhaustion and is typical behavior in the late stage of a cycle, experts emphasized.

Threat from the Dollar

The primary macroeconomic risk, analysts say, is linked to the US dollar. Most traders are betting on its weakening by opening short positions. According to the CFTC, the number of such positions has reached extreme levels.

This situation makes the market vulnerable to a short squeeze. If the dollar’s value begins to rise, traders will be forced to close losing trades en masse. This could trigger a retreat from risk assets, including cryptocurrencies, analysts explained.

In the near term, attention will focus on US inflation and employment data, which will determine market development in the third quarter. At the July meeting of the Fed, analysts expect the key rate to remain unchanged. The regulator is likely to emphasize its data-dependent decision-making. The September meeting will be crucial, with balanced chances for a rate cut.

The majority (97.5%) of market participants expect the rate to remain unchanged following the July 30 meeting.

Bitcoin’s Potential Drop to $110,000

Analysts at Glassnode suggested a correction of Bitcoin to $110,000 to test key support. The reason could be a “price gap” without significant trading volume at this level.

Experts explained that during the rapid price increase from $110,000 to $115,000, investors had little time to buy. As a result, a zone without strong support based on asset acquisition price was formed.

“Below the current spot price remains an ‘air pocket’ of volume from $115,000 to $110,000. This is the result of the price passing through the range without transaction opportunities,” the report states.

Glassnode believes the market may test the zone in search of support. Although such gaps are not always filled, they create a “pull” for the price.

Analysts used the cost basis of short-term holders to determine potential support levels. These levels also help identify prices at which investors might start taking profits.

Using standard deviation, Glassnode forecasted a possible local high around $140,000 if growth resumes.

“If the market breaks higher, $141,000 will likely become the next major resistance zone, where selling pressure could quickly intensify,” the company concluded.

Experts at Fairlead Strategies predicted a rise in the leading cryptocurrency to $135,000, followed by a correction.

Later, CoinDesk analyst Omkar Godbole warned of the exhaustion of Bitcoin’s bullish momentum.