Bitcoin price analysis for May

Price action will remain choppy until BTC/USD is able to clear overhead resistance.

Now that the Bitcoin reward has halved on Monday, May 11, when the reward for mining has been reduced from 12.5 to 6.25 BTC, investors can now determine the next impetus for price movements. 

Despite the fact that BTC and USD are seen as an uncorrelated asset classes, the crypto price has moved in tandem with US stock prices over the past two years.  Additionally, BTC/USD has been negatively correlated to the US dollar, which has been a headwind for the cryptocurrency.

Let’s analyse how these factors may affect Bitcoin price next month.

Is BTC correlated to the S&P 500 index?

Over the past 5-years, the weekly movements of BTC/USD have been correlated to the S&P 500 index. If we look at a weekly rolling correlation to measure how closely Bitcoin moves in tandem with US stocks, it appears that the number is robust – approximately 75 per cent. This means that 75 per cent of the performance of the S&P 500 index is mimicked by the performance of BTC/USD

The movements in BTC/USD are also negatively correlated to the US dollar. This means as the dollar rises, BTC/USD faces headwinds. 

Bitcoin price technical analysis

Bitcoin has rebounded 127 per cent since hitting a low on March 23. This low is in tandem with the low hit by the S&P 500 index. Prices have rebound but are now facing strong resistance near a downward sloping trend line that comes in near 8,960. Short term support is seen near the 50-day moving average at 8,735.

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There is a lot of overhead resistance that Bitcoin needs to clear before it can begin to break out. BTC/USD will need to clear the February 2020 highs at 10,050 and then a downward sloping trend line that connects the December 2017 highs to the June 2019 highs that comes in near 10,750. 

Momentum on Bitcoin has turned positive as the MACD (moving average convergence divergence) has recently generated a crossover buy signal.

The bottom line

The key takeaway is that Bitcoin has been moving in tandem with other riskier assets and has benefited from halving. Going forward, price action will remain choppy until BTC/USD is able to clear overhead resistance. 

The cryptocurrency will likely take its cues from movements in the dollar and the S&P 500 index. Look for prices to hover in a 1,000 point range until there is a clear indication that the US economy is opening back up.

Bitcoin to US Dollar
Daily change
17049.2
Low: 16901.8
High: 17364.9
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