Inverse Signals: Why Bitcoin Weakness Is Attributed To Dollar Strength

Tony "The Bull" Severino

1 year ago

3 mins read

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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

Tony "The Bull" Severino

Tony "The Bull" Severino, CMT, is a distinguished figure in the cryptocurrency analysis sector, renowned for his in-depth technical expertise and innovative approach to market trends. As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market.
A seasoned Chartered Market Technician, Tony's prowess in identifying and capitalizing on market patterns is unmatched. His academic and professional journey in market analysis has firmly established him as a leading authority in technical trading strategies. Tony’s approach is heavily influenced by the principles of Elliott Wave Theory, a method known for its rigorous assessment of investor psychology and price movements.

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Before his ascent in the financial analysis world, Tony honed his skills in journalism. His background in this field has endowed him with a unique ability to present intricate market dynamics in a clear and compelling manner, making his insights highly sought after by a broad audience that ranges from casual readers to professional traders.
His professional affiliations underscore his commitment to excellence and continuous learning. As a partner of Elliott Wave International and TradingView, Tony collaborates with other leading experts to enhance his knowledge and skills. His active membership in the CMT Association further aligns him with the highest standards of industry practices and ethics.

Tony’s nickname, "The Bull," aptly reflects his aggressive and optimistic outlook on the cryptocurrency markets. His forecasts often anticipate significant upturns, earning him a reputation for bullish predictions that have frequently led to lucrative outcomes for those who follow his advice.

In summary, Tony "The Bull" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. His dedication to advancing the understanding of market forces and his commitment to providing high-quality, reliable analysis make him a pivotal figure in the world of cryptocurrency trading.

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