Inverse Signals: Why Bitcoin Weakness Is Attributed To Dollar Strength

Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality

Created by industry experts and meticulously reviewed

The highest standards in reporting and publishing

How Our News is Made

Strict editorial policy that focuses on accuracy, relevance, and impartiality

Ad discliamer

Morbi pretium leo et nisl aliquam mollis. Quisque arcu lorem, ultricies quis pellentesque nec, ullamcorper eu odio.

Bitcoin price is currently on the ropes, potentially about to lose support at around $56,000. But could the recent weakness in the cryptocurrency market be more a factor of a strong dollar?

TD Sequential Triggers Anti-Correlated Signals On BTCUSD, DXY

Weeks ago, we posed the question if or not the Dollar Currency Index making new highs in 2021 was a dangerous situation for Bitcoin. After more than $10,000 per coin was wiped off the price of BTC, the answer was a resounding yes.

But much like the cryptocurrency uptrend in late 2020 and early 2021 came to an abrupt halt, even the dollar’s short-term destruction must at some point come to a full stop.

The potential for a reversal is here, according to the TD Sequential – a market timing indicator created by Thomas Demark. The idea behind the tool is that after a specific sequence of candles is made, conditions are met for a reversal.

Such conditions are typically indicated by a 9-setup, or a 13-countdown. However, the 8th candle before the 9 can also yield such results, and truly the tides can change at any point – the tool just highlights when that is most likely to occur.

In the chart below, both Bitcoin and the DXY have opposing signals – making the probability for a reversal in each asset all the more likely.

Inverse TD setups could spell reversal | Source: DXY on TradingView.com

Bitcoin Weakness, Dollar Strength

In the chart above, there are some important things to note that might suggest the reversal isn’t quite ready. For example, the DXY hasn’t “perfected” its 9-count. Meanwhile, Bitcoin price is only on an 8-count, yet has been perfected.

A count is only perfected when the final candle of the series has surpassed the rest of the sequence. A perfected setup is still not a guarantee of results, but increases the chances of success even further.

Bulls take the stairs up, bears take the elevator down | Source: BTCUSD on TradingView.com

Bitcoin price is also not in danger of a larger reversal, until the uptrend support has been broken on the daily. The stair-stepping pattern above would be broken with a close below $54,000 – such step-like patterns weren’t violated during past uptrends until they were confirmed to be over.

The reason for the dramatic downside in Bitcoin post-new highs being made, very well could be due to strength in the dollar, and less-so weakness in the first ever cryptocurrency. The last time Bitcoin price reached such levels, the dollar was valued at far less by comparison using the DXY. With the DXY making a comeback, the king of cryptocurrency isn’t looking quite as strong as it once was.

The point of the article, however, is to highlight the count on the TD Sequential on both assets, which could make this shift in strength and weakness a very short-lived trend.

Follow @TonySpilotroBTC on Twitter or join the TonyTradesBTC Telegram for exclusive daily market insights and technical analysis education. Please note: Content is educational and should not be considered investment advice.

Featured image from iStockPhoto, Charts from TradingView.com

Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.