Bitcoin dropped on Tuesday, with its bull run foreshadowed briefly by short-term profit seekers.
The benchmark cryptocurrency plunged almost 1.5 percent to $19,385 ahead of the New York opening bell, suggesting that traders secured their gains at local tops.
The modest sell-off sentiment surfaced after Bitcoin established a new record high of $19,873. It also occurred as futures tied to the BTC/USD exchange rate surged above $20,000 but fell to as low as $19,000 just ten minutes later.
Worth noting that a $1,000 swing is just 5% now.
— Crypto₿ull (@CryptoBull) December 1, 2020
The traders favoring a bullish outcome, nevertheless, outnumbered those with a bearish bias. They caught up the price right before it was about to break below the $19,000-mark, showing a higher risk-appetite for the cryptocurrency amid a favorable macroeconomic outlook.
Bitcoin targets a close above $20,000 heading into the Tuesday New York session. Source: BTCUSD on TradingView.com
Heading into the Tuesday session, Bitcoin’s short-term outlook looked tilted towards bulls. It is because of a critical event on the economic calendar. The Federal Reserve Chairman Jerome Powell will appear before the Senate Banking Committee to provide his testimony on the “Coronavirus Aid, Relief, and Economic Security Act.”
In his prepared remarks, Mr. Powell has stressed the need to have unprecedented lending programs in place, a breakaway view from US Treasury Secretary Steven Mnuchin, who ordered to end the facilities on or before December 31.
The Fed programs in the spotlight helped it purchase corporate bonds, assisted medium and small-scale businesses during the pandemic, and channeled money to local and state governments. With the coronavirus cases still surging in the US, Mr. Powell noted that they would require them further.
“These programs serve as a backstop to key credit markets and have helped restore the flow of credit from private lenders through normal channels,” he said. “We have deployed these lending powers to an unprecedented extent.”
The US dollar index fell below long-term support levels after Mr. Powell prepared remarks made to the wire. Its downside move appeared as investors remained hopeful about extra monetary stimulus in the short-term, coupled with hopes of developing a working coronavirus vaccine that may accelerate the US economy’s recovery.
Good for Bitcoin
Bitcoin, which behaves as a safety net against a depreciating US dollar, therefore eyed to extend its gains after Mr. Powell’s testimony. Traders also stayed long on the cryptocurrency as more and more institutional investors started speaking in favor of holding it in a traditional investment portfolio.