The almighty dollar and DXY are currently trending at an important inflection point, with the potential to cripple the blossoming bull market in Bitcoin and other cryptos, or push them to new highs.
Devastating Impact of Dollar Dominance
2022 destroys cryptocurrencies and other risk assets due to the seemingly endless dominance of the dollar. The DXY Dollar Currency Index rose to its highest level since Bitcoin’s inception.
Because the USD is half of the most traded cryptocurrency pairs because the dollar is the global reserve currency, when the dollar is strong, the other side of the pair weakens.
As momentum begins to fall in DXY, it emerges in crypto. The last few months have provided much-needed rally relief in the asset class, thanks to the falling USD.
After returning to the COVID level, DXY is trying to find support. But according to the MACD, the momentum may prove too heavy for the dollar to defend, 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 Could Cause Crypto Continuity
DXY is a weighted dealer trading USD against GBP, JPY, and other currencies. The monthly DXY chart shows what could be a rebound that the crypto market should prepare for. However, if the MACD passes bearish and confirms at the end of the month, it can cause the bearish momentum to strengthen and create a dramatic decline in the dollar index.
This is very important for Bitcoin, Ethereum, and other crypto markets, because the DXY bullish cross on the MACD every month is what drives the new crypto season. If the MACD fails to confirm the bearish crossover and diverges upwards, it could lead to further falls in crypto and other assets.
Bitcoin is up more than 40% to start 2023, and many cryptocurrencies have posted several hundred percent rallies. A bearish crossover in DXY could mean a continuation of the recent crypto uptrend.
All eyes across the financial world should be on this important inflection point. What happens next with the dollar and crypto?