Michaël van de Poppe, one of the leading analysts of the market, shared his thoughts on Bitcoin (BTC) and what it takes for the cryptocurrency market in general to reverse the current trend.
In a new video he shared, Van de Poppe told his 165,000 YouTube subscribers that investors should pay attention to the US dollar index (DXY) and how the euro moves against the dollar. DXY shows us the value against 6 different currencies traded all over the world, consisting of Euro, Japanese Yen, British Pound, Canadian Dollar, Swiss Krona and Swedish Frang.
When we examine the historical correlation between the US dollar and Bitcoin price, it turns out that the current strengthening of the dollar may threaten the Bitcoin price. For a long time, the narrative that “BTC is an independent asset class” has been accepted in the cryptocurrency world. This indicated that BTC had a bright future as an independent investment vehicle. In 2020, CoinShares even released a report proving the lack of correlation between Bitcoin and commodities and traditional stocks.
Max Keizer was one of the first to draw our attention to Bitcoin's negative correlation with the US dollar. In other words, when the US dollar rises, in principle, BTC depreciates. It is also possible that there is rarely a positive correlation between BTC and the US dollar.
According to analyst Van de Poppe, risky assets were hit hard by the Fed's monetary policy, while the DXY index reached new highs. The US Dollar Index (DXY) is currently at 109.57. The euro is currently worth $0.9959. Bitcoin is currently trading at $20,096. According to the analyst, in the short term, the Euro/USD index should reverse and reach 1.01 again, depending on whether DXY falls below 108.6 points in the coming weeks. In such a scenario, Bitcoin could regain momentum.
Van de Poope is not the only name to point out the importance of the DXY index in Bitcoin's future price movements. Senior analyst Justin Bennett tells his 107,300 Twitter followers that the dollar has to “weak out” for cryptocurrencies to rise. According to the analyst, DXY's rise to the 109.30 level is the biggest obstacle in front of Bitcoin.