Variant virus discovered in the UK, US dollar stimulus plan advanced, Bitcoin plummeted by $1,500

A slight rebound in the U.S. dollar market prompted Bitcoin to reverse its upward momentum on Monday.

The benchmark cryptocurrency Bitcoin fell more than $1,500 in early European trading, hitting an intraday low of $22,400. For now, it appears that Bitcoin's latest downtrend is a correction to offset its overbought conditions. The BTC/USD exchange rate broke through $24,300 on Sunday after rising 127% in 10 weeks.

Bitcoin hits record high of $24,300. Source: TradingView.com

Meanwhile, the U.S. dollar, which usually moves inversely to Bitcoin, is also trying to rebound from oversold conditions. The dollar rose 0.78% on Monday as demand for the dollar surged in Europe after the UK implemented new coronavirus restrictions, and low liquidity in the pound also temporarily exaggerated the dollar's yield curve.

Britain, already hit by Brexit uncertainty, has been hit by a new variant that is 70% more transmissible than its predecessor, according to health secretary Matt Hancock. However, the so-called "VIU-202012/01 variant" may pose no more danger and is not vaccine-resistant. Experts say there is no evidence that vaccines will not protect against the new virus, but Britain's chief scientific adviser said the country may impose tighter restrictions on public life in the meantime.

The U.S. dollar index has fallen 11.80% from its mid-March peak of 102.99. During the same period, Bitcoin has risen 487%.

Futures Gap

Bitcoin traders believe Monday’s price drop was caused by a trading gap on the futures chart.

Looking back, Bitcoin futures listed on the Chicago Mercantile Exchange have gapped over the weekend. It is believed that the spot rate tends to move in the direction of these missing spaces to fill most of the gaps. Therefore, with the latest move, spot Bitcoin is trying to fill the gap.

Bitcoin futures gap fills after spot price moves lower on Monday Source: TradingView.com

Now, there are two missing gaps that Bitcoin needs to fill in the next step. An anonymous trader predicts that the price of Bitcoin may fall further to $18,115 and $16,995 in the medium term.

Bitcoin Trend Outlook

The medium-term outlook for the US dollar is bearish, thanks to the recurring and persistent epidemics and the Federal Reserve's commitment to continue its bond-buying program indefinitely, as well as the decision of US congressional leaders to pass a $900 billion stimulus plan to help small and medium-sized enterprises and American households suffering from the economic consequences of the 2020 coronavirus outbreak. This has also led to constant calls for shorting the US dollar in the market since September 2020.