Right now, Bitcoin may be threatened by the growing U.S. economy, rather than by other cryptocurrencies. The U.S. Dollar Index (DXY), which compares the U.S. dollar to a basket of major world currencies, has experienced a surge in recent days. It is currently flirting with a break above the 100 mark and heading toward 101.6. The growth of the U.S. dollar is usually a predecessor of an upcoming BTC correction.
Pressure on BTC
This surge coincides with Bitcoin's struggle below $120,000, a significant resistance level. In the past, the DXY and Bitcoin have had an inverse relationship. Risky assets such as Bitcoin and other assets denominated in U.S. dollars typically suffer when the dollar appreciates. A strong dollar deters foreign investors from buying Bitcoin, reduces global liquidity and usually indicates broader macrouncertainty as money shifts to supposedly safe haven assets.
While the DXY is trying to break above a significant moving average cluster, Bitcoin is consolidating beneath a pronounced horizontal resistance in the current charts. Bitcoin may encounter challenges that could lead to a more significant correction if the dollar keeps strengthening and confirms a reversal from its prior downward trend. Additionally, this is more than just short-term price action.
DXY gains power
A wider flight to safety would be indicated if DXY gains traction above the 102 resistance, and the cryptocurrency market — particularly speculative sectors like altcoins, may sustain collateral damage. Bitcoin's volume is also exhibiting signs of exhaustion, and its RSI is still high, suggesting that momentum is waning.
Unless BTC makes a clear breakout soon, the dollar's macro pressure and the convergence of resistance at $120,000 could signal short-term bearishness. A steep retracement of Bitcoin is possible if DXY rises. Bulls must breach $120,000 before the macro noose becomes even more constricted. Risk management comes first until then.
