Why Bitcoin’s weakness is attributed to the dollar’s strength

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Bitcoin price is currently on the ropes, potentially on the verge of losing support at around $ 56,000. But could the recent weakness in the cryptocurrency market be more of a factor for a strong dollar?

TD Sequential Triggers of Anti-Correlated Signals on BTCUSD, DXY

A few weeks ago, we asked the question whether the Dollar Currency Index hitting new highs in 2021 was a dangerous situation for Bitcoin. After more than $ 10,000 per coin was erased from the price of BTC, the answer was a definite yes.

But just as the cryptocurrency’s uptrend in late 2020 and early 2021 came to a screeching halt, even the short-term destruction of the dollar must at some point come to a complete stop.

Related reading | 10 monthly bullish bitcoin price charts to start in November

The potential for a reversal is there, according to the TD Sequential – a market timing indicator created by Thomas Demark. The idea behind the tool is that after creating a specific sequence of candles, the conditions are right for a reversal.

Such conditions are usually indicated by a setting of 9 or a countdown of 13. However, the 8th candle before the 9 can also give such results, and the tides can really change at any time – the tool puts simply highlight when this is most likely to happen.

In the chart below, Bitcoin and the DXY have opposite signals, making the likelihood of a reversal of each asset all the more likely.

Reverse TD Setups Could Mean A Reversal | Source: DXY on TradingView.com Bitcoin weakness, dollar strength

In the chart above, there are some important things to note that could suggest that the reversal is not quite ready. For example, the DXY has not “perfected” its 9 stroke. Meanwhile, the price of Bitcoin is only on an 8 count, but has been perfected.

A count is only perfect when the final candle in the streak has passed the rest of the streak. A perfect setup is still not a guarantee of results, but increases the chances of success even more.

The bulls go up the stairs, the bears go down the elevator | Source: BTCUSD on TradingView.com

The price of Bitcoin is also not in danger of a larger reversal, until the uptrend support is broken daily. The above staircase setup would be broken with a close below $ 54,000 – such staircase setups were not violated in past uptrends until confirmed to be over.

Related reading | Is the Dollar Index making new 2021 highs dangerous for Bitcoin?

The reason for Bitcoin’s dramatic decline after new highs could very well be due to the strength of the dollar and less to the weakness of the very first cryptocurrency. The last time the price of Bitcoin hit such highs, the dollar was valued at much less compared to the DXY. With the return of the DXY, the king of cryptocurrency doesn’t look as strong as it used to be.

The purpose of the article, however, is to highlight the TD Sequential tally on both assets, which could make this change in strength and weakness a very short-lived trend.

Follow @TonySpilotroBTC on Twitter or join the TonyTradesBTC Telegram for exclusive daily market information and technical analysis training. Note: The content is educational and should not be taken as investment advice.

Featured image from iStockPhoto, charts from TradingView.com

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