The US Dollar Reaches a New One-Year Peak
The US Dollar Index (DXY) has recently reached its highest level in almost a year. This signifies a significant shift in the market, as the dollar enters a potential consolidation phase. The DXY broke out above the descending downtrend line, indicating a medium-term uptrend. It has also closed several daily candles above the key resistance level at 105.5, which, if validated as support, will be crucial for sustaining the uptrend.
Analyst: DXY Needs to Cool Down
According to well-known cryptocurrency analyst @Negentropic_, the DXY needs to cool down after its recent surge. He points out that the Relative Strength Index (RSI) is already in overbought territory, indicating that a correction is expected before the uptrend continues. However, the analyst believes that greater market liquidity, which is often associated with an increase in the DXY, tends to benefit Bitcoin and the cryptocurrency market in the long run.
Saylor: Bitcoin is a Lifeline
Meanwhile, renowned investor Michael Saylor highlights that the US dollar has been strengthening against various local currencies over the past decade. Despite this, Saylor remains a Bitcoin maximalist and suggests that if you don’t have access to dollars, Bitcoin can serve as a lifeline. This suggests that while the dollar may act as a hedge against weakening local currencies, Bitcoin may also serve as a hedge against the dollar.
Hot Take: Bitcoin as a Hedge Against the Dollar
The recent surge in the US dollar index has implications for both traditional financial markets and cryptocurrencies. While historically, there has been a negative correlation between the DXY and BTC, this does not necessarily mean that the crypto sector will decline. In fact, during transitional periods, when there is no clear trend, the correlation can disappear or even become positive. This suggests that Bitcoin may serve as a hedge against the dollar, especially when investors seek alternative assets to hedge against sluggish economic growth.
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