Dollar (DXY) reaches inflection point, critical level for continuation of crypto
The almighty dollar and the once-trending DXY are at an important turning point, with the potential to cripple the booming bull market in Bitcoin and the rest of crypto, or propel it to new heights.
The devastating effect of dollar dominance
2022 destroyed cryptocurrencies and other risky assets due to the dollar’s seemingly endless dominance. The DXY Dollar Currency Index climbed to its highest levels since the inception of Bitcoin.
Because the USD is half of most cryptocurrency trading pairs due to the dollar being the global reserve currency, the other side of the pair weakens when the dollar is strong.
As momentum started to wane in DXY, it started to rally across crypto. The past few months have provided a much-needed lift of relief across the asset class, thanks to a falling USD.
After retracing to COVID levels, DXY is trying to find support. However, according to the MACD, the momentum may prove too heavy for the dollar to defend against, leading to a bearish crossover on the one-month chart.
Dollar momentum on the cusp of crossover, BTC in orange | DXY at TradingView.com
Bearish DXY Crossover May Lead to Crypto Continuation
DXY is a weighted basket of USD trading against GBP, JPY and other currencies. The monthly DXY chart shows what could be a reversal in progress that the crypto market should be prepared for. However, if the MACD crosses bearish and confirms at the end of the month, it could cause the bearish momentum to strengthen and create a dramatic decline in the dollar index.
This is especially important for Bitcoin, Ethereum and the rest of the crypto market, as the bullish DXY cross on the monthly MACD is what led to the recent crypto winter. If the MACD fails to confirm a bearish crossover and diverges upwards instead, it could lead to further collapse across crypto and other assets.
Bitcoin is up more than 40% to start 2023, and many cryptocurrencies have posted multi-hundred percent rallies. A bearish crossover in DXY could mean continuation of the recent crypto uptrend.
All eyes across the financial world should be on this important turning point. What’s next for the dollar and crypto?
