According to analysts, the US Dollar Index (DXY), which measures the strength of the US dollar against a basket of major currencies, shows signs of improving momentum. They believe the index may be nearing the bottom, and there is a potential bounce on the horizon.
However, the dollars that are strengthened can have a great deal of meaning in cryptocurrencies, particularly Bitcoin (BTC). The largest cryptocurrencies have historically been inversely correlated with DXY.
dxy shows signs of reversal, but bitcoin may feel pressure
In his latest post on X (formerly Twitter), Barchart shared on his weekly chart that DXY is about to form “Death Cross” for the first time since January 2021.
In the context, the death cross is a technical analysis pattern that occurs when the short-term moving average falls below the long-term moving average. This is considered a bearish signal, and in many cases traders predict further price drops.
However, Burchart noted that this marked the market bottom in the last two times that happened (2018 and 2021). Thus, although the signal is bearish, historical trends suggest that it can indicate a potential rebound in the dollar.
About Token TA and Market Updates: Want more token insights like this? Sign up for Editor Harsh Notariya’s daily crypto newsletter.
Swissblock’s head macroeconomicist Henrik Zeberg shared a similar perspective. In his latest video, he pointed out that many people are currently weakening to the dollar. However, he says that this feeling may not be accurate at this time.
Zeberg observed that momentum index (RSI) showed higher and lower values. This is usually a sign that the current trend is losing its strength. He added that although the dollar is currently in the cave, there may be short-term bounce or stabilization.
But in the end, DXY could still face the final stage of downward movement. This phase will potentially bring the index to a new lower tier, perhaps before the market begins to recover or change directions around September.
“When we see everyone now starting to get very bearish on the dollar, it may be time for us to start thinking about where we can see the bottom,” he said.
Meanwhile, certified financial analyst Andrea Rishi argued in a recent statement that concerns about the potential USD debilitating are based on the movement of the DXY index. However, he considers the nominal broad US dollar index (nominal DXY) to be a more reliable indicator for assessing whether the dollar is entering the bear market.
“Currently, nominal DXY remains firmly within established bullish channels, with key support identified at the 120th level. Importantly, it suggests that short-term debilitating may be exaggerated as no decisive violations have yet to be seen under this threshold,” Lisi said.
All of this is positive for the dollar, but the impact on Bitcoin is less favorable. Beincrypto previously reported that Bitcoin prices often move in the opposite direction to the value of the dollar.
For example, past tensions between Federal Reserve Chairman Jerome Powell and President Trump, or broader economic development that put downward pressure on DXY, have generally had a positive effect on Bitcoin’s price dynamics.
So, if DXY rises, Bitcoin could drop. Furthermore, the possibility of a dollar-driven bitcoin decline is exacerbated by other market factors.
Beincrypto recently highlighted some signs of slower speeds or potential price corrections in Bitcoin’s ongoing bull run. These include increased exchange flow from whales, destroyed high coin days (CDD), and negative altcoin bitcoin correlations. All of these suggest potential sales pressure and increased volatility.
Furthermore, historical data from Coinglass shows that the third quarter had a weaker period for normal Bitcoin. Average returns are just 6.16% behind the other quarters.
These seasonal trends, combined with potential DXY rebounds, can create a challenging environment for Bitcoin.
Disclaimer
In compliance with Trust Project guidelines, Beincrypto is committed to reporting without bias and transparent. This news article is intended to provide accurate and timely information. However, we recommend that readers independently verify the facts and consult with experts before making decisions based on this content. Please note that our terms and conditions, privacy policy and disclaimer have been updated.
