/Is The Dollar Index Making New 2021 Highs Dangerous For Bitcoin?

Is The Dollar Index Making New 2021 Highs Dangerous For Bitcoin?

The recent nerves in the stock market and macro world has caused the dollar to surges to a new 2021 high, just as Bitcoin continues to set new records. 

But is the greenback’s awakening a dangerous situation for cryptocurrencies, or is something else afoot?

BTC Barely Reacts As DXY Taps New 2021 High

Bitcoin price is in price discovery mode, after breaking its former high set earlier in the year. The cryptocurrency is pitched as a replacement for gold, and even the dollar – the current global reserve currency. 

Cryptocurrencies, commodities, and everything else are priced in dollars as the most dominant currency acting as the base conversion rate. This means that Bitcoin price increases inversely to the dollar on the BTC/USD trading pair. 

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So it is unusual that Bitcoin continues to tap new highs all while the DXY Dollar Currency Index has reached the highest level of all of 2021. 

dxy dollar currency index

The dollar currency index has reached a new 2021 high | Source: DXY on TradingView.com

The Dollar Strength Keeps Bitcoin Price At Bay 

The DXY is a weighted basket of forex currencies trading against the US dollar (USD). That basket includes major trade partners, the Euro (EUR), Japanese yen (JPY), British pound sterling (GBP), Canadian dollar (CAD), Swiss franc (CHF), and the Swedish krona (SEK).

The highs in the DXY could be indicative of weakness in the currencies in the basket, or strength in the dollar itself. Bitcoin’s current performance or lack of strong reaction after new highs, could more so be due to strength in the dollar holding the cryptocurrency back. 

Not every touch of this trend line has been pleasant.  | Source: BTCUSD on TradingView.com

Both assets making yearly highs is highly suspect, and could suggest a bigger reaction brewing in one or both sides of the BTC/USD pair. Bitcoin price also happens to be touching a trend line where such a reaction occurred in the past. 

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An uptrend is defined as a series of higher highs and higher lows – something characteristic of both assets in the short term. What is very different between the two, is the longer term trend. For Bitcoin, the primary trend has been up while for the dollar has been down. 

One of these assets is in an uptrend, the other is not | Source: BTCUSD on TradingView.com

After this short term move completes, each asset should resume its previous trajectory, unless the trend is ready to change for a long time to come. 

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Featured image from iStockPhoto, Charts from TradingView.com
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