In recent news, it appears that Bitcoin (BTC) may experience a significant upward trend due to the weakness of the United States dollar, which has fallen to a three-month low. Popular trader Moustache believes that the current conditions are favorable for Bitcoin to repeat its price history.
Previously, Bitcoin had a strong inverse correlation with the strength of the dollar, but this relationship has weakened in recent times. Nevertheless, the latest movements of the dollar have caught the attention of traders. The U.S. Dollar Index (DXY), which measures the value of the dollar against a basket of other major currencies, is approaching a test of support at 100 for the first time in several months. After reaching a 20-year high in 2022, the dollar has faced resistance and its bearish behavior, if it continues, could benefit Bitcoin. If the 100 mark is breached, it could further support Bitcoin’s potential for gains.
Moustache summarized the situation by stating, “Calm before the storm. Big Move is still loading,” along with a chart showing the DXY challenging the bottom of a Gaussian channel on weekly timeframes. According to Moustache, this is the point where investors should position themselves. He also pointed out that similar movements in the past led to a parabolic curve in Bitcoin’s price in 2016-2017 and 2020-2021.
The weakness of the dollar can be attributed to market expectations of a potential reversal in U.S. interest rate hikes. Despite a hawkish Federal Reserve, inflation is abating, making a reversal in interest rate hikes more likely. The recent release of the Consumer Price Index (CPI) for the previous month was below expectations, further supporting risk assets.
Another trader, Mikybull Crypto, predicts that the downward trend of the dollar will continue, with BTC/USD potentially reaching $35,000 as a result.
In addition to the traders’ perspectives, Josh Olszewicz, a popular trader, considers the DXY to be the “single most important chart” for Bitcoin in the coming year. Olszewicz believes that the technical weakness of the DXY, combined with a reduction in Bitcoin issuance, could lead to a significant price reaction for Bitcoin. He also highlights that previous movements in the DXY from 100 to 90 after halvings have resulted in multi-month bullish rallies for Bitcoin.
Taking a broader perspective, William Clemente, co-founder of Reflexivity Research, presents the year-on-year change in the DXY against the behavior of BTC/USD over the years. This analysis shows that the last time the DXY traded at 100 was in mid-April 2022, when Bitcoin was priced around $40,000.
Overall, the current weakness of the U.S. dollar, as indicated by the DXY, has caught the attention of traders and has the potential to impact Bitcoin’s price in the coming months. If historical patterns repeat themselves, Bitcoin may experience a significant upward trend similar to what was observed in previous years. However, it is important to note that every investment and trading move involves risk, and readers should conduct their own research before making any decisions.
Source link
