Bitcoin price at risk? US Dollar index confirms bullish 'golden cross'

The Dollar Strength Index (DXY) achieved its highest level successful astir 10 months connected Sep. 22, indicating increasing assurance successful the U.S. dollar compared to different fiat currencies similar the British pound, euro, Japanese yen, and Swiss franc.

DXY "golden cross" confir

Moreover, investors are acrophobic that this surge successful request for the U.S. dollar mightiness airs challenges for Bitcoin (BTC) and cryptocurrencies, though these concerns are not needfully interconnected.

U.S. Dollar Index (DXY). Source: TradingView

The DXY scale confirmed a golden cross pattern erstwhile the 50-day moving mean surpassed the longer 200-day moving average, a awesome often seen arsenic a precursor to a bull marketplace by method analysts.

Impacts of the recession and ostentation risks

Despite immoderate investors believing that humanities trends are determined solely by terms patterns, it's important to enactment that successful September, the U.S. dollar exhibited strength, adjacent successful the look of concerns astir inflation and economical maturation successful the world's largest economy.

Market expectations for U.S. GDP maturation successful 2024 hover astatine 1.3%, which is little than the 2.4% mean complaint implicit the preceding 4 years. This slowdown is attributed to factors similar tighter monetary policy, rising involvement rates, and diminishing fiscal stimulus.

However, not each summation successful the DXY scale reflects heightened assurance successful the economical policies of the U.S. Federal Reserve (Fed). For example, if investors opt to merchantability U.S. Treasuries and clasp onto cash, it suggests a looming recession oregon a important uptick successful ostentation arsenic the astir apt scenarios.

When the existent ostentation complaint is 3.7% and connected an upward trajectory, there's small inducement to unafraid a 4.4% yield, prompting investors to request a 4.62% yearly instrumentality connected 5-year U.S. Treasuries arsenic of Sep. 19, marking the highest level successful 12 years.

U.S. 5-year Treasury yield. Source: TradingView

This information unequivocally demonstrates that investors are avoiding authorities bonds successful favour of the information of currency positions. This whitethorn look counterintuitive initially but aligns with the strategy of waiting for a much favorable introduction point.

Investors expect that the Fed volition proceed raising involvement rates, allowing them to seizure higher yields successful the future.

If investors deficiency assurance successful the Fed's quality to curb ostentation without causing important economical harm, a nonstop nexus betwixt a stronger DXY and reduced request for Bitcoin whitethorn not exist. On 1 hand, determination is so a decreased appetite for risk-on assets, evident from the S&P 500's antagonistic show of 4.3% successful September. However, investors admit that hoarding cash, adjacent successful wealth marketplace funds, does not guarantee unchangeable purchasing power.

On 1 hand, determination is so a decreased appetite for risk-on assets, evident from the S&P 500's antagonistic show of 4.3% successful September. However, investors admit that hoarding cash, adjacent successful wealth marketplace funds, does not guarantee unchangeable purchasing power.

More wealth successful circulation is affirmative for Bitcoin price

As the authorities continues to rise the indebtedness ceiling, investors look dilution, rendering nominal returns little important owed to accrued wealth supply. This explains wherefore scarce assets specified arsenic Bitcoin and immoderate starring tech companies whitethorn execute good adjacent during an economical slowdown.

Related: How overmuch is Bitcoin worthy today?

If the S&P 500 continues its downtrend past investors mightiness exit risk-markets careless of their scarcity oregon maturation potential, astatine slightest initially. In specified an environment, Bitcoin could so look antagonistic performance.

However, it's important to enactment that this investigation overlooks the information that the aforesaid pressures from ostentation and recession volition apt summation the wealth supply, either done further Treasury indebtedness issuance oregon the Fed's enslaved purchases successful speech for U.S. dollars.

Either way, accrued liquidity successful the markets tends to favour Bitcoin since investors whitethorn question refuge successful alternate assets to support against "stagflation" — a concern marked by stagnant economical maturation alongside rampant inflation.

Therefore, the DXY aureate transverse whitethorn not needfully beryllium a nett antagonistic for Bitcoin, peculiarly connected longer timeframes.

This nonfiction is for wide accusation purposes and is not intended to beryllium and should not beryllium taken arsenic ineligible oregon concern advice. The views, thoughts, and opinions expressed present are the author’s unsocial and bash not needfully bespeak oregon correspond the views and opinions of Cointelegraph.