Bitcoin vs. The Dollar: A Peculiar Relationship
Since the start of 2022, Bitcoin (BTC) has taken to a peculiar tango with the United States dollar, moving in opposite directions. Believe it or not, the correlation coefficient, which measures this not-so-romantic dance, fell to an impressive -0.77 in early July, marking the lowest it’s been in 17 months. So if these two were on a date, they’d likely be sitting at opposite ends of the table with their backs turned to each other!
The Tech Market’s Unexpected Ally
During this tumultuous year, Bitcoin found an unlikely companion in the tech-heavy Nasdaq Composite, which has seen its correlation with BTC soar to 0.78. It seems like while Bitcoin is losing ground, tech stocks have been keeping it company in the downward spiral, both feeling the much-feared inflation pressure. The irony? Bitcoin has plummeted by over 60%, while the Nasdaq has only managed a modest -29.72% return. If this were a sports match, Bitcoin would be losing, while Nasdaq is just trying to avoid a total knockout.
The Resilient Dollar: A Champion
In the midst of this mayhem, the dollar has been flexing its muscles. The U.S. dollar index (DXY), which tracks the dollar’s strength against a basket of currencies, was hovering around its highest point since 2003 at 105.78. Talks of the Federal Reserve tightening its monetary policy has traders buzzing like bees at a picnic, eagerly anticipating a 75 basis point hike. It’s a game of “what ifs,” with many thinking the dollar might just be getting warmed up!
What Lies Ahead for the Dollar?
Traders are placing their bets with hopes that the Fed won’t raise rates past 3.3% by year-end. But amidst this uncertainty, there’s chatter that a rate cut could be coming our way if inflation numbers cool down. Around 40% of influential Wall Street analysts believe the dollar will stay at its current levels while another 36% think it’ll take a breather before year’s end.
Bitcoin’s Rocky Road Ahead
The forecast for Bitcoin isn’t all sunshine and rainbows either. The analysis points to the potential for Bitcoin to hit a bottom around $15,600 due to the MVRV-Z Score’s historical trends. As the DXY forms a classic ‘double top’ technical pattern, it could pull the dollar back down—if it smacks into that 103.81 support level. Should this happen, there’s a chance stocks and cryptocurrencies could see a spark of cheer once the dollar capitulates!
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