• The DXY Dollar Currency Index has recently climbed to the highest levels since the inception of Bitcoin, potentially impacting prices of cryptocurrencies.
• The DXY is attempting to find support, but momentum could prove to be too heavy for the dollar to defend against and lead to a bearish crossover on the one month chart.
• A bearish DXY crossover could lead to further continuation in crypto prices, while a bullish divergence would cause further collapse in crypto markets.
The Almighty Dollar Dominance
The almighty dollar and its currency index (DXY) are at an important inflection point with potential impact on Bitcoin and other cryptocurrencies. Recent price movements have given rise to a bull market in cryptocurrency, but this trend can be overturned if the dollar regains dominance.
Devastating Impact Of Dollar Dominance
In 2022, cryptocurrencies were affected by US dollar dominance as measured by the DXY index which reached highs not seen since Bitcoin was introduced. As USD is often used in trading pairs due to its status as global reserve currency, when it strengthens it weakens other currencies in the pair. Fortunately for crypto markets, signs of weakening dollar have caused a much needed relief rally across many asset classes.
Bearish Crossover Could Lead To Crypto Continuation
The DXY is composed of USD trading against GBP, JPY and other currencies and currently appears to be making a rebound on monthly charts. However if momentum proves too heavy for the dollar and MACD crosses bearish it could result in a dramatic decline in value leading to further continuation of cryptocurrency prices.
Bullish Divergence Would Lead To Collapse In Crypto Markets
On the flip side, should MACD fail confirm a bearish crossover instead diverge upwards then it could cause further collapse across crypto markets resulting from increased strength of US dollar over other currencies or assets.
Overall there are two possible scenarios that could play out depending on how strong US dollar remains relative to other currencies or assets – either continuation or collapse of current bull market for crypto-assets depending upon whether bearish or bullish divergence occurs respectively