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Nexo

The Dollar Regains Lost Ground, But Bitcoin Yet To React

Tony Spilotro by Tony Spilotro
3 weeks ago
in Bitcoin
0

Bitcoin price is once again approaching current record highs, and now that the momentum is back in favor of bulls, new all-time highs could soon be just ahead. While this is mostly nothing new for the leading cryptocurrency by market cap, the recent rally back to local resistance has happened all while the dollar has strengthened significantly.

What exactly does this mean for the ongoing cryptocurrency bull market? And why is the dollar suddenly performing so well despite continued debasement? 

The Dollar Begins To Rise From Year-Long Bearish Descent

Bitcoin price is only a mere $1,000 away from reclaiming $60,000 and making an attempt at setting another new record high. The powerfully trending cryptocurrency has been consolidating for weeks, potentially building a base at which to rocket higher from.

Much of the initial uptrend was not only due to the strength of Bitcoin, but also due to the weakness in the dollar – the global reserve currency. As one half of the most dominant BTC trading pair, the dollar’s free fall since the pandemic began has been one of the most widely discussed topics in finance.

RELATED READING | THE DOLLAR’S ROLE IN THE BITCOIN BLOODBATH EXPLAINED

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The US alone has added trillions of dollars in money supply due to ongoing stimulus efforts, weakening the buying power of the leading fiat currency. The narrative of only 21 million BTC along with rising hyperinflation fears has propelled Bitcoin and crypto into super stardom as of late.

But being bearish on the dollar has long been a crowded trade, and things have been turning around. And while that usually means should start flipping bearish in crypto also, Bitcoin has fended off any further correction so far.

bitcoin dollar dxy btc zoomed

Suddenly, Bitcoin is no longer following an inverse relationship with the dollar | Source: DXY on TradingView.com

 

Bitcoin Unfazed By Bouncing Greenback, Is This Time Really Different?

The above deviation in the typically inversely correlated DXY and BTCUSD charts, is highly unusual. The DXY is a weighted basket of other top national forex currencies trading against USD, and is used as a barometer of health in the greenback.

Historically, there’s been an obvious relationship between the two charts and assets, but few moments have been as pronounced as the Black Thursday selloff and bull run since, or the 2017 bull market peak in Bitcoin and resulting bear market.

The below chart demonstrates how the two extreme moves in the DXY Dollar Currency Index started a bear market in Bitcoin, then a bull market in the cryptocurrency asset class.

bitcoin dollar dxy btc

Reversals in the DXY have also been start and end points for crypto bear and bull markets | Source: DXY on TradingView.com

The phrase “this time is different” is considered a dangerous investment strategy, however, looking at the price action above, something is quite different this time around.

RELATED READING | A DECREASE IN BITCOIN WHALES SUGGESTS A BEAR MARKET IS DUE

The DXY has reversed, rising to the highest point since Bitcoin went parabolic in September 2020, yet the leading cryptocurrency by market cap has barely flinched.

Either Bitcoin is about to explode unlike ever before, and this time is very, very different, or the crypto asset could see its first serious correction in some time.

Featured image from Deposit Photos, Charts from TradingView.com
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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 excellent. 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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