Dollar May Outshine Bitcoin: Is the Death Signal a Bull Trap?

Bitcoin (BTC) bulls are expecting a continuation of the decline in the dollar index (DXY), while the emerging 'death cross' signal is raising concerns.

With the dollar losing 10.78% of its value in the first half of the year, Bitcoin investors are anticipating the continuation of this weakness and that the cryptocurrency market will reach new highs. However, CoinDesk analyst Omkar Godbole pointed out that the recent technical outlook in the dollar index poses risks for Bitcoin investors.

In the weekly chart of DXY, the 50-week simple moving average (SMA) line is expected to fall below the 200-week SMA line shortly. Although this situation, known as a 'death cross' in technical analysis, is typically interpreted as a long-term bearish signal, it has consistently represented the low points and the beginnings of upward trends for the dollar since 2009.

In the past four major 'death cross' signals, the dollar index exhibited sharp increases each time after making a bottom. Most recently, after the crossover that occurred in January 2021, DXY rose from the 90 level to surpass 114 in September 2022.

Is a bull trap coming for Bitcoin?

CoinDesk analyst Godbole notes that technical signals do not always yield expected results, but paying attention to past trends can help investors manage their positions better. The recent 'death cross' signal forming in the dollar index could also turn into an unexpected bull trap for Bitcoin investors.

According to the analyst, the current situation requires Bitcoin investors to reassess their market expectations. In particular, a potential upward trend in the dollar during the second half of the year could overshadow the anticipated rally in the cryptocurrency market.