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bitcoin dollar dxy btcusd
Nexo

How the Dollar’s Fall from the Top Could Fuel the Future of Bitcoin

Tony Spilotro by Tony Spilotro
2 years ago
in Bitcoin
0
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Bitcoin was built and designed to be directly opposed to the dollar in every way. In a sense, it is its destiny to trade against the dollar until it meets its untimely demise. That demise could very well be beginning thanks to the pandemic, and its fall from glory could also fuel a future where Bitcoin takes its throne.

Here’s what that could look like from a technical analysis perspective.

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DXY Dollar Currency Index Short-Term Reversal Failure Could Lead To Devastating Breakdown

The dollar is one half of every most dominant Bitcoin trading pair on every top crypto exchange. The same goes for nearly every other asset globally, from stocks to gold, and even other nations’ currencies.

The dollar has been the global reserve currency over the last 100 years. It is the currency in which all exchange rates are based on.

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Bitcoin has been pitched as someday having the potential to take that role away from the almighty dollar, but such a scenario seems incredibly far off.

The two assets are at an important junction. Bitcoin is retesting support at $10,000 just as the DXY Dollar Currency Index appears to be staging a reversal. A rounding bottom formation and a complex inverse head and shoulders pattern suggest that the dollar is due for a rebound.

bitcoin dollar btcusd dxy daily

DXY Dollar Currency Index BTCUSD Short-Term Reversals | Source: TradingView

But just as the dollar begins to bounce on daily timeframes, its touching downtrend resistance, and Bitcoin is retesting its “meme” downtrend line.

The DXY chart above with Bitcoin price action superimposed shows how the two assets move in inverse. If, for some reason, DXY gets rejected at this red, dotted downtrend line, Bitcoin could soon soar.

Zooming out further shows that the dollar’s downhill decent could be a lot deeper than most are expecting, and it could also provide the fuel for the crypto asset to begin its next bull run.

bitcoin dollar btcusd dxy monthly wedges

DXY Dollar Currency Index Rising Wedge Breakdown and Retest | Source: TradingView

The Greenback’s Downside Target Lays Path To Bitcoin’s Next All-Time High

The DXY Dollar Currency Index is a weighted basket of top forex currencies trading against the dollar, but it does a great job depicting the overall health of the dollar long term.

Zoomed out to monthly timeframes, the dollar’s “rebound” looks to be a bearish retest of a lost support line, now acting as resistance. The massive, two-decade-long pattern is breaking down, similarly to the previous, two-decade-long rising wedge that broke down at the turn of the millennium.

A drastic collapse in the dollar from here could lead to a future where Bitcoin is king.

bitcoin dollar btcusd dxy born ath

DXY BTCUSD All-Time High Correlation Chart | Source: TradingView

Examining the current rising wedge pattern on monthly DXY price charts and comparing it with Bitcoin’s lifecycle, the results are shocking.

Bitcoin was born just as the dollar was getting its footing from the Great Recession fallout, then the crypto asset’s next two major peaks coincided perfectly with each significant plunge in the DXY.

Measuring the distance between each significant crash in the DXY and top in Bitcoin projects the next top in the crypto market to be put in around January 2022.

Following that, another peak would mark the bottom of the move in the DXY and the cryptocurrency’s next peak in February 2026.

RELATED READING | WHY THE UPCOMING US ELECTION IS BITCOIN’S BIGGEST RISK

The drop in the dollar every four years appears to match up well with Bitcoin’s halving-based valuation theories, like the stock-t0-flow model, which predicts the cryptocurrency’s price to spike any day now as a result of diminished supply.

If the DXY Dollar Currency Index turns around here and falls deeper, the stage is set perfectly for Bitcoin’s next bull market. Perhaps even for the asset to become the next global reserve currency, as many claim it will eventually be.

Featured image from DepositPhotos, Charts from TradingView
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a digital media executive and global remote work leader with a decade of content experience and excellence. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck - literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn't yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can't yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter and feel free to drop me a line if you would like to work together.

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