BITCOIN Will the negative correlation with DXY make it rally?

13 сент.Exactly a year ago (September 25 2023, see chart below) we published a comparative analysis of Bitcoin (BTCUSD) against the U.S. Dollar Index (DXY):

** Negative correlation and the Fed next week **
We argued of the natural negative correlation the two have and BTC rose immediately to its impressive October 2023 - March 2024 rally, just when DXY got rejected at the top of its Megaphone pattern.

We believe that, only a few days before the Fed cuts the Interest Rates next Wednesday for the first time in years, it is useful to update this chart.

** Not just about the DXY **
As mentioned, this correlation shows principally the negative nature between the two financial assets but there are other parameters involved also. You can see that from late January 2024 to mid-March 2024, DXY started rising but BTC didn't decline, instead it posted an insane rally, which was solely attributed to the launch of the Bitcoin ETFs.

As this move cooled down, the market started correcting the rally's mania and even though the DXY started a strong decline in late June, BTC didn't raise but instead entered a 50k - 70k range because of the strong correction on the stock market.

** So what's next? **
So the obvious question that arises, is 'what's coming next for Bitcoin'? Well as you realized, that can be answered only in relation to the stock market and DXY moves. BTC is sitting currently on its 1W MA50 (blue trend-line), while the DXY on its 1W MA200 (orange trend-line).

Technically, if the DXY rebounds on its 1W MA200, Bitcoin should decline and vice versa if DXY breaks its 1W MA200 (would be the first time since January 10 2022), Bitcoin should rally. However that also depends on what the stocks do.

As a result, we believe that if the stock market rises, BTC will follow it upwards, regardless of what the DXY does (unless it accelerates so fast upwards that will break above the 107.370 Resistance). If the DXY rebounds while stocks rise, there should be a BTC rally but just a moderate one. If DXY breaks below its 1W MA200 while stocks recover, we expect the rally to be much higher than most anticipate.

On the other hand, a further decline on stocks combined with a DXY rebound, would translate into an aggressive sell-off on Bitcoin. If however stocks keep falling while the DXY makes the historic break below its 1W MA200, we expect the July - September consolidation on Bitcoin to be extended, so the trend should be sideways until one of those parameters/ condition changes.

Which scenario do you think is more likely to take place? Feel free to let us know in the comments section below!

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