The US Dollar Index (DXY), which tracks its strength against a basket of leading world currencies, is showing the first signs of recovery. According to analysts, DXY may be close to forming a bottom, which will pave the way for short-term growth.
However, dollar strengthening traditionally puts pressure on the cryptocurrency market. Historically, an inverse correlation between DXY and Bitcoin has been observed, raising concerns among market participants. DXY is giving reversal signals.
On the weekly timeframe, the dollar index is forming a "death cross," which is usually considered a bearish factor.
However, there have been cases in history — for example, in 2018 and 2021 — when a similar signal coincided with a local bottom and preceded an increase in the index. This suggests that the current situation may lead to a short-term strengthening of the dollar.
What experts say
The chief macroeconomist of Swissblock noted that the pessimism surrounding the dollar may be excessive. According to him, the RSI indicator shows rising lows, indicating a weakening of the downward trend.
"When the majority starts expecting a dollar decline, that's when a reversal point may form," said Tseberg.
It suggests that the dollar may stabilize or slightly rebound in the coming weeks, although a final stage of decline that could last until September is not ruled out.
Andrea Lizi, CFA, added that many forecasts are based on DXY movement, but a more accurate picture is provided by Nominal DXY.
"Currently, the index continues to move within a bullish channel, with important support at 120 points. As long as the price has not broken this threshold, the current weakness of the dollar appears temporary," emphasized Lizi.
Consequences for Bitcoin
Historically, dollar strengthening negatively affects the price of #BTC. Analysts have previously noted that periods of DXY decline often coincide with Bitcoin growth. Currently, the increasing pressure from the dollar may pose an additional risk to the crypto market.
Moreover, Bitcoin shows signs of local slowing down. Among the worrying factors are the increase in transfers from large coin holders to exchanges, a high CDD indicator, and a negative correlation between BTC and altcoins. These data indicate a potential increase in selling pressure.
Seasonality and statistics
The third quarter is considered a weak period for BTC. If a potential dollar strengthening is added, the BTC market may face a correction. Analysts believe that the combination of seasonal factors and rising DXY could create a challenging environment for the continuation of the current bullish trend.
Forecast
The key zone for the DXY index in the coming weeks remains the range of 100–102 points. If the dollar bounces back confidently, it could signal a drop in Bitcoin below the $110,000 mark. However, if the dollar continues to weaken, Bitcoin will have a chance to recover and test the $120,000 level.