Based on several indicators, Bitcoin has the potential to extend its ongoing bullish trend and hit $25,000 per token by March.
The token managed to free itself from a downward slope late last week, which was paired with an increase in trading volume. Bitcoin's upward movement also placed the token above its points of resistance, which includes a psychological ceiling of $20,000 and a 20-week EMA of around $19,500.
Bitcoin's ability to break three resistance points while displaying stronger trading volume improved investors' confidence in an extended price rally, bringing its upper target point to around $25,000, a 20 percent hike from the current price levels.
Macroeconomic indicators further support Bitcoin's possible rally. The recent inflation data showed signs of a slower inflation pace, resulting in investors' expectations that the Federal Reserve would make a policy pivot shortly.
As investors developed better sentiment on the market, the U.S. dollar weakened in the past month. At the height of inflation, the greenback typically strengthens significantly — as shown in the middle of 2022 — because investors prefer to bet their money on a "safer" asset than stocks or cryptocurrencies.
Since March 2020, Bitcoin and the greenback had shown an inverted correlation, meaning that when one asset went up, the other went down and vice versa. TradingView data showed that as of January 16, the correlation coefficient between Bitcoin and the U.S. dollar index was -0.83.
Analysts predict that the dollar would experience a "death cross," a state when an asset's 50-period EMA is lower than its 200-period EMA. It means the greenback's short-term trend underperforms compared with its long-term movement. In other words, the U.S. dollar is in the middle of a weakening momentum.
"Expecting more downside in the mid to long term," market analyst Crypto Ed said. "Risk on assets should bounce more on that. Or better said: I expect BTC to break its bearish cycle as the big run in DXY is finito."
Lack of institutional investors
There is a downside in Bitcoin's recent upward movement, namely the lack of institutional investors among its many traders.
CryptoQuant's Fund Holdings index revealed that the total volume of Bitcoin held by digital asset holdings — including exchange-traded funds (ETFs), trusts and other forms of funds — had been dropping despite the price rally.
Furthermore, comparisons between Fund Flow Ratio and CryptoQuant's Token Transferred metrics showed no unusual transactions happening on the network, except for some on crypto exchanges. Analysts said that at the bottom price, institutional investors usually purchased tokens "quietly" off the market.
This data showed that institutional investors did not participate actively in the market and remained as observers. It also indicated that these institutional investors did not expect a "full-fledged uptrend turn" for Bitcoin.
Bitcoin remains to be best bet
Although altcoins also displayed significant surges in values for an entire week, crypto analyst Benjamin Cowen said that Bitcoin was still the best bet for investors in the crypto market.
Cowen explained that altcoins remained risky despite price increases. Meanwhile, the Bitcoin Dominance index, which tracks Bitcoin's dominance over the total crypto market cap, sees a steady rise regardless of Bitcoin's price trend.
"Ever since we got started in 2022, I said altcoins are just simply not worth the risk compared to Bitcoin," Cowen said. "I don't think they're worth the risk yet [but] it doesn't mean that some of them haven't bottomed out on their USD pairs."
As regulators worldwide call for cryptocurrency control following the crypto fiasco in 2022, Bitcoin is in a safer place than other tokens. Cowen said altcoins were prone to tighter regulator control due to their nature. Meanwhile, Bitcoin would be less likely to be under similar regulatory scrutiny, as many consider the token a commodity.