Today, the Dollar Currency Index is seeing a death cross on the daily time frame. Bitcoin, as an asset trading against the USD, is particularly vulnerable to strength or weakness in the greenback.
But what happens when the dollar dies cross and what does this mean in the past for crypto?
DXY Dollar Currency Index Suffers Ominous Signals
Bitcoin was created as an anti-fiat solution in the face of quantitative easing and big bank bailouts.
In many ways, the main enemy should be the all-powerful dollar. BTC also trades against USD as the main conversion rate and the most dominant trading pair.
When the dollar is strong, Bitcoin tends to be weak and vice versa. Today, the dollar is showing the world a sign of potential weakness with a death cross on the DXY Dollar Currency Index.
A death cross appears | DXY on TradingView.com
What Does The Death Cross Mean For USD?
DXY trades USD against a weighted basket of other top currencies like EUR, GBP, and JPY. Even excluding Bitcoin, BTCUSD seems to be more sensitive to the gold cross and death in DXY.
A death cross occurs when the 50-day moving average crosses the 200-day moving average, and a golden cross occurs when the 50DMA crosses the 200DMA. Each is an early signal of a trend change.
DXY just crossed daily for the first time since the golden cross at the end of July 2021. Although this may not be very significant, the data suggests otherwise.
How Bitcoin reacts to dollar death crosses | BTCUSD on TradingView.com
Bitcoin Gains 359% Average Boost, History Shows
If you compare from 2015 to now, DXY has been dead beyond six, including the current signal. Three of these crosses took place from 2015 to 2017. The other two took place in 2020, before the latest bull run.
In the five signals since the bottom of the 2015 bear market, the price of Bitcoin rose an average of 359%. The three weakest signals return between 64% and 120% each and see a lot of volatility at the front and back of each rally.
The other two death crosses led to a more dramatic drop in DXY and therefore higher in Bitcoin. The signal returned 567% in 2020 and an astonishing 935% in 2017 during the last bull run that made the top cryptocurrency a household name.
How much will Bitcoin rally this time?