Bitcoin is Finished? US Dollar says otherwise!

If traders believe that DXY will continue to act as a leading indicator for Bitcoin, they should expect Bitcoin to bounce.


China has been on a rampage trying to crackdown on cryptocurrencies, threatening banks and miners throughout the country. Over this past weekend, China ordered domestic banks and payment platforms to stop provides services linked to trading of virtual currencies.  As a result, Bitcoin has been selling off on fears that future of currency may not be Bitcoin, but rather simply digital fiat currencies.  However, China isn’t the only one spreading fear into crypto HODLers.  An Elon Musk tweet can send Bitcoin in either direction, depending on how he feels that day.  The US government retrieved ransom Bitcoin, which until this point, was thought to be untraceable.  In addition, more and more government officials in the US and around the world are calling for regulation of cryptos (governments always way their piece of your money!). 

So, Bitcoin is moving lower. In February, Bitcoin began forming a rounding top formation and reached its all-time high on April 14th at 64895.22, which happened to be the same day as the Coinbase IPO (coincidence?).  On May 10th, the cryptocurrency started to sell off aggressively and stalled near 30,000.  Bitcoin consolidated in a flag pattern from May 10th to June 22nd between 30,066 and 41,341. On June 19th, the 50 Day Moving Average crossed below the 200 Day Moving Average forming a “Death Cross”, which as the name may imply, is a bearish signal.  Today, price broke below the 30,066 lows and the bottom of the flag.  The target of a flag pattern is the length of the flag poll added to the breakdown point from the flag, which in this case targets near 11,500. 

Source: Tradingview,

If we overlay a chart of DXY (blue line) on a chart of Bitcoin, it appears that the US Dollar Index has been leading BTC since February.  Price in DXY formed 3 higher highs ahead of Bitcoin.  The US Dollar then began moving lower on March 30th, ahead of the Bitcoin selloff which began in April 14th.  DXY bottomed on May 25th and began moving higher, with a breakout on June 16th (FOMC).  The US Dollar Index traced to the 61.8% Fibonacci retracement level from the March 31st highs to the May 25th lows, near 92.00.  If traders expect this relationship to continue, BTC may be in for an aggressive bounce soon.  It’s difficult to determine where BTC may bounce to if it is following DXY, as we don’t yet know if today’s low is going to be the low to measure from.  However, if we assume it is, the 61.8% Fibonacci retracement in Bitcoin from the April 14th highs to today’s lows is near 51,030!

Source: Tradingview,

Everything you wanted to know about DXY

BTC by itself points to a continued selloff to near 11,500.   However, the current relationship between US Dollar and Bitcoin points to a bounce to 51,030. Which is right?  If traders believe that DXY will continue to act as a leading indicator for Bitcoin, they should expect Bitcoin to bounce.  If traders feel the flag pattern is a more reliable formation, BTC will move lower. Perhaps BTC won’t reach either level.  However, if Bullard and Kaplan continue to be hawkish, while Williams and Powell continue to be bearish, there is sure to be good 2-way action in the coming months in both BTC and the US Dollar!

Learn more about forex trading opportunities.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account