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bitcoin dollar dxy btcusd
Nexo

How The Greenback Turned Bitcoin and Crypto into a Sea of Red

Tony Spilotro by Tony Spilotro
2 years ago
in Bitcoin
0
Advertisement

Bitcoin has crashed over 10%, Ethereum over 15%, and the total cryptocurrency market cap has lost over $37 billion in value over the last 48 hours alone. Several signs point to a potential top in the crypto market – whether temporary or not remains to be seen.

A flight back into the safety net of the dollar and a major reversal in the greenback could be responsible for the crypto market turning into a sea of red. These assets, however, may only be just getting their feet wet for now, with a deeper plunge into an ocean of uncertainty as the United States election nears.

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The month of September and Labor Day celebrates the end of the summer and a return to harder work ahead. It is also the final stretch of campaign runway that former Vice President Joe Biden has to take Trump out of office.

This coming Presidential election is especially pivotal, considering just how polarizing the current President’s term has been. There’s also widespread political unrest on both sides, racial outrage, peaceful and violent protests, looting, and more – like never before. The nation is also thus far poorly withstanding the pandemic and related economic conditions.

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

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It’s severely harmed the dollar and allowed assets like Bitcoin, precious metals, and equities to “fly.” But dollar sentiment has dropped to extreme lows, significant reversal signals have triggered, and already the greenback is on a major rebound.

This rebound could be what is responsible for turning the crypto market into a sea of red, and crushing Bitcoin’s recent rally.

Bitcoin (BTCUSD) Drops Over 10% On a 1% Rise In The Dollar Currency Index (DXY)

The election-related risk has prompted Barron’s to recommend investors hedge their stock portfolios with shorts. The sudden switch in sentiment is a risk reduction across the board, where investors are securing recent profits ahead of any potential turbulence ahead.

The VIX – a measure of implied volatility in the S&P 500 – is also potentially signaling a major market shakeup ahead. Investors would be cashing out into the dollar to protect capital from any collapse in equities, metals, and crypto – the exact opposite of the recent trend and flight away from the inflation of the dollar.

bitcoin btcusd dxy dollar greenback crypto

DXY Dollar Currency Index Bitcoin Comparison Chart | Source: TradingView

If the recent losses in crypto and precious metals are early signs that the dollar is recovering, then things could get quite bad for Bitcoin. The chart above shows just a 1% rise in the DXY Dollar Currency Index – a weighted basket of top currencies trading against the greenback.

RELATED READING | WHAT A REBOUNDING DOLLAR COULD MEAN FOR BITCOIN AND ALTCOINS

The 1% rise to 93 points in the dollar potentially caused an over 10% collapse in Bitcoin and 15% in Ethereum. With Fibonacci-based targets ranging from 95 points to as high as 100 points, Bitcoin could see an enormous collapse leading into the 2020 presidential election.

Past data shows that Bitcoin has never set a new all-time high ahead of an election. Once that uncertainty and risk are gone from the market, the cryptocurrency heads off into a new bull run. But could the dollar get in the way this time around?

Featured image from Deposit Photos.
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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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