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bitcoin dollar dead cat bounce
Nexo Logo

Why The Dollar’s Coming Dead Cat Bounce Could Be Devastating For Bitcoin

Tony Spilotro by Tony Spilotro
2 years ago
in Bitcoin, Cryptocurrency news, Technical analysis
Reading Time: 3 mins read
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The dollar is in sharp decline, and it has allowed other currencies to gain the upper hand. It has also let Bitcoin, gold, altcoins, and other hard assets shine.

But will a coming dead cat bounce in the dollar devastate recent crypto market returns and cause a temporary pullback? Or is this the start of a bigger comeback by the king of all cash-based fiat currencies?

USD: After Dramatic Drop To Two Year Low, TD Sequential Triggers 9 & 13 Buy Signals

Nearly every financial asset across any market is traded against the dollar and its exchange rate is valued in USD. Even Bitcoin, gold, and altcoins typically trade against the dollar as the dominant base currency pair.

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The dollar’s status as the global reserve currency gives it incredible influence over all other markets. When the dollar is strong, so is the United States economy, and stocks boom as a result.

But when the dollar is in decline, as we’ve witnessed recently, hard assets like gold, Bitcoin, and real estate climb. The recent fall in the once almighty and dominant dollar set the currency back to a fresh two-year low.

dollar dxy bitcoin td sequential

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DXY TD Sequential 9 + S13 Setup | Source: TradingView

According to the TD Sequential indicator, a dead cat bounce or perhaps a full comeback is near. The market timing indicator has triggered a 9 and 13 buy setup on daily DXY charts. DXY is the dollar currency index weighing its performance against the rest of the market.

Related Reading | Here’s Why a Bouncing U.S. Dollar Is Bad News For Bitcoin

Further technical analysis backs up the indicator’s call that a reversal could soon be coming in the dollar. DXY is currently forming a falling wedge ready to break out, coinciding with a bullish divergence on the Relative Strenght Index.

dxy dollar bitcoin btc

DXY Falling Wedge and Bearish Divergence on RSI | Source: TradingView

Why A Dead Cat Bounce In The Dollar Is Bad For Bitcoin, Gold, and Altcoins

A bouncing dollar doesn’t bode well for Bitcoin’s recent rally, which could see a pullback as a result. This is best demonstrated by comparing Bitcoin against an inverse DXY dollar currency index chart to better depict the dollar’s continued weakness versus Bitcoin’s strength.

dxy dollar bitcoin btc

Inverse DXY Line Chart Rising Wedge | Source: TradingView

Flipping the DXY chart in the inverse, turns the falling wedge into a rising wedge, a bearish structure signaling a reversal.

Related Reading | Crypto Is Up Over 80% in 2020—and Google Users Are Taking Notice

Removing the trendlines completely, and adding in a Bitcoin BTCUSD line chart from Bitstamp very accurately lines up the cryptocurrency’s rise with the dollar’s inverse decline. The resemblance is undeniably uncanny. It also shouldn’t be surprising as the cryptocurrency trades against USD on its primary base currency pair.

dxy dollar bitcoin btc

Bitcoin BTCUSD Bitstamp Versus Inverse DXY Line Chart Comparison | Source: TradingView

A breakdown of the inverse dollar’s rising wedge could take Bitcoin price down with it. Not just Bitcoin, either. The dollar reversing will also tarnish gold’s recent gains, and potentially deal a major blow to the recent altcoin rally.

Major altcoins like Ethereum, XRP, and several others have benefit even more so than Bitcoin due to the dwindling dollar. With USD reversing, altcoins may nuke on their fiat-bound trading pairs.

Markets are unpredictable, however, and even with all signs pointing to a rebound in USD, anything is possible given the ongoing pandemic situation in the US.

Tags: bitcoinbtcbtcusdBTCUSDTcryptodollardollar currency indexdxyusdxbtxbtusd
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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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