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bitcoin dollar fortune teller bounce
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Here’s Why a Bouncing U.S. Dollar Is Bad News For Bitcoin

Tony Spilotro by Tony Spilotro
2 years ago
in Bitcoin
Reading Time: 3 mins read
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The dollar sank in July to the lowest point in two years in response to more stimulus money being printed to inflate the economy. At the same time, Bitcoin spiked to the highest level in over a year.

The dollar has since bounced, and the leading cryptocurrency by market cap experienced its first powerful pullback since the recent uptrend began. Here’s how a bouncing dollar may just be the start of bad news for Bitcoin.

Dollar Drops To Dangerous Two-Year Lows, But Bounce May Just Be Beginning

Bitcoin, like most assets across the global market, trades against the almighty dollar. The dollar’s role as the global reserve currency means that it is the most common base currency across trading pairs and exchange rates.

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The dollar has spent nearly the last 100 years in power, helping the United States grow to become the world’s economic superpower.

Related Reading | Bitcoin’s Perfect Storm On The Horizon As Analyst Calls For ‘Inevitable’ Dollar Collapse

But since the pandemic began, the dollar has been weakening, falling to the lowest rate on the DXY dollar currency index in two years. The currency has fallen against other major currencies like the yuan, precious metals like gold, and cryptocurrencies across the board.

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Bitcoin broke above resistance at $10,000 and rocketed to $12,000, while major altcoins like Ethereum and XRP began soaring.

Overnight Saturday night, profit-taking from a large whale may have prompted the first signs of rejection in Bitcoin’s uptrend. Or, according to an uncanny correlation with the dollar, a bounce in the reserve currency may have been responsible for the crypto asset’s decline.

bitcoin btcusd dollar

Inverse Bitcoin BTCUSD Versus DXY Dollar Currency Index Correlation Comparison | Source: TradingView

Dead Cat Bounce, Or Will The USD Recovery Erase Bitcoin’s Recent Rally?

The dollar is bouncing, and although it is unclear currently if this is the first sign of a reversal, or if its just a dead cat bounce before the global reserve currency tanks harder.

Analysts have been calling for as much as a 35% or more collapse in the dollar versus other major currencies. And while that has yet to happen, the dollar has indeed been plummeting.

According to an inverse Bitcoin chart, the asset has been trading almost exactly opposite the dollar index. The cryptocurrency’s strength almost appears to be entirely dependant on the dollar’s decline and weakness.

Related Reading | Why Crypto is the Best Insurance Policy For Long-Term Wealth Preservation

With USD bouncing and Bitcoin price action playing out totally inverse to the dollar, a strong recovery in the fiat currency could erase recent crypto gains.

While such a scenario is certainly possible, things could also turn increasingly bullish for Bitcoin if the dollar continues its descent, or perhaps falls completely from its pedestal.

Tags: bitcoinbtcbtcusdBTCUSDTcryptodollarusdxbtxbtusd
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a global remote work leader with a decade of award-winning 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 at @tonyspilotroBTC and feel free to drop me a line if you would like to work together.

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