BTC & DXY Inverse Correlation (Study Case) 12/6/2020

已更新

First of all, this technical analysis is NOT A FINANCIAL ADVICE TO BUY/LONG OR SELL/SHORT. This analysis is for educational purposes only.

I just research some historical price action in relation to the current situation. I think, I use this as my reference in the future. I already made a correlation between SPX and DXY last October 15, 2020. I just inserted it here on this correlation between BTC and DXY.

If you think, the TA sounds interesting, feel free to like this idea.

Remember that actual price action always prevails over speculations.
__

Technical Analysis

Correlation between US Dollar Index (DXY) and Bitcoin (BTC)
Major Observations from 2016 and 2020 Bitcoin Halving in weekly time frame to US Dollar Index
When Bitcoin is in accumulation stage, likely US Dollar Index is in distribution stage.
When Bitcoin is in advancing stage, likely US Dollar Index is in declining stage.
When Bitcoin is in distribution stage, likely US Dollar Index is in accumulation stage.
When Bitcoin is in declining stage, likely US Dollar Index is in advancing stage.
It seems like the law of supply and demand works well.
Transfer in and Transfer out by most of the institutions, investors and traders in either BTC or DXY.

10 Year Chart of US Dollar Index with Elliot Wave Counts and Notes for Bitcoin
Here, is the 10-year chart of DXY. I see strong inverse correlation between Bitcoin and US Dollar Index as I stated on my Major Observations. I think in the next weeks to come, there is a high probability that Bitcoin may see new highs as the US Dollar Index is heading 88.155 (currently at 90.701). I see several bearish indications on RSI, Stoch RSI, MACD and specially below the Moving Averages. But the question is: Will it break 88.155 after? As you see in the chart, in the first quarter of 2018, settles to hold above 88.155 then after several weeks it moves higher as bitcoin continues to dump for whole year 2018. If the Elliot Wave count in the is correct, then Bitcoin will go higher for at least 1 month then dump the rest of the year 2021, like what happened in year 2018. That’s the bear argument. On the Other hand, the bull argument, if DXY breaks the support at 88.155, well, generally good for the Stock Markets and Bitcoin. If that happened, Bitcoin may reach the projected targets of 30K, 50K or even 300K. Only time knows. Another Bull argument (not found in the chart), If DXY goes up, can BTC goes up too? Yes, it can happen but positive fundamentals of Bitcoin must back up the price appreciation. Just like what happened to S&P 500 in year 2014 to 2015 while Bitcoin is dumping at that time (Correlation Between US Dollar Index and S&P 500 Index).

Correlation Between US Dollar Index and S&P 500 Index
Well, today, DXY has broken that two trendlines as SPX is pumping hard to make new all-time highs. Inverse Correlation indeed. That chart is dated October 15, 2020. I think the question now is: Will 88.155 in DXY – Break and move down or Hold and move up? We will see it eventually.

Price Chart Itself for US Dollar Index
This is why I’m cautious if similar fractals play out with a similar scenario 2014,2015 and 2018 for both Bitcoin and US Dollar Index. Note: In the assumption of Inverse Correlation between the two assets.

2014-2016
Just compare the Bitcoin chart to US Dollar Index Chart. You will see at what stage of the market the chart is telling. But the interesting question in relation to the current Bull rally 2020 is: Will the rally continues higher? Well, there is a high probability for that. As you see in the chart of 2014-2016, when Bitcoin tries to break the previous all-time highs for three times. It dumps two times to break it by 34% each. The third attempt is successful and goes higher. At the time Bitcoin is in advancing stage while US Dollar Index is in declining stage. Right now, in this current rally, Bitcoin is in advancing stage of a larger Wave 3 while US Dollar Index is in declining stage in C wave of a larger Wave 4’s ABC Correction. But the problem is: I don’t know yet when will C wave in US Dollar Index will ended maybe at 88.155. You know actual results always wins.