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dollar bitcoin dxy btc usd
Advertisement

The Dollar Is Building Bullish Momentum As Bitcoin’s Wanes

Tony Spilotro by Tony Spilotro
2 years ago
in Bitcoin
0
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Bitcoin price just pumped following news that Square made a massive purchase in BTC, however, the dollar regaining momentum as the top cryptocurrency’s wanes, could soon suggest a pullback and a better buying opportunity for the major payments corporation. Here’s what inversely correlated technicals are saying about the two vehemently opposed currencies.

Why The Dollar’s Rebound Threaten’s Bitcoin’s Bull Run Beginnings

Bitcoin is supposedly breaking out of a bear market. It has retested and confirmed the former downtrend triangle resistance as support, and is holding strong above $10,000 and now $10,500 despite a string of bad news.

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After almost two weeks of nonstop negative news breaking and being unable to push prices lower, one ray of positive just sent prices soaring higher. But it may be short-lived, according to the what the DXY Dollar Currency Index says about the greenback regaining some strength.

RELATED READING | BLOOMBERG: BITCOIN “SHOULD BE A PRIMARY BENEFICIARY” POST PANDEMIC

The dollar’s sudden strength comes as investors begin cashing out ahead of the high-risk election and pandemic related uncertainty, and it could put a damper on the early bull run beginnings Bitcoin has been exhibiting.

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dollar usd dxy currency index

DXY Dollar Currency Index Daily Inverse Head And Shoulders Throwback & Bullish Retest | Source: TradingView

The DXY is a basket of top world forex currencies weighted against the dollar and shows the overall health of the global reserve currency. After a sharp peak on Black Thursday – the one asset that benefitted the most that day – the dollar went into a steep downtrend.

At the bottom of a falling wedge, depicted in a red dashed line, a complex inverse head and shoulders reversal patterned has turned things around. It is common for such reversal patterns to pull back to the neckline to retest resistance as support, keeping trading “interesting” according to pattern authority Thomas Bulkowski.

That retest was completed via a bull flag and is now aiming higher. The problem for crypto, however, is that if you take the same chart and flip it in the inverse, you essentially get Bitcoin’s chart, and that’s ominous fo the asset class as a whole.

bitcoin btcusd crypto dollar

BTCUSD Head And Shoulders Throwback & Bearish Retest | Source: TradingView

Inverse DXY Chart Shows What Could Happen To Crypto

The chart above nearly matches the structure of the DXY in inverse perfectly. Rather than a falling wedge, a rising wedge represented in the green dashed line, peaked with a head and shoulders formation. The one twist is that rather than flagging, Bitcoin has been trading within a potentially bearish pennant.

RELATED READING | OWNING BITCOIN “IS A MUST” SAYS PRICE OF TOMORROW AUTHOR, JEFF BOOTH

Taking the BTCUSD chart, and comparing it against a DXY line chart, the inverse relationship becomes even more striking. The two continuation patterns on each chart appear to want to meet at the same point and target.

bitcoin btcusd dollar dxy currency indexx

DXY Versus BTCUSD Inverse Correlation And Comparison Chart| Source: TradingView

Because the two assets move in opposition, the dollar strengthening could send Bitcoin back to retest lows. Long-term, however, the dollar is in trouble. The fiat currency system is failing, and the more stimulus efforts needed to survive the pandemic, the more dangerous the situation will get for the greenback, and the better it will become for Bitcoin.

Featured image from Deposit Photos, 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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