Key Points:
The US Dollar Index (DXY) is below its annual moving average and is more than six points lower than its 200-day moving average.
Due to the traditional inverse correlation with DXY, Bitcoin is expected to benefit from this trend.
This time, Bitcoin's price movement has not followed the historical precedent of the dollar.
Bitcoin is expected to benefit from US debt and a weak dollar, as the dollar has set a new record low in twenty years.
On July 8, new research from the on-chain analysis platform CryptoQuant reaffirmed the belief in the inverse correlation between Bitcoin and the US Dollar Index (DXY).
Since the beginning of this month, the strong BTC price continues to be driven by the tailwind of the dollar, with the dollar's exchange rate against trade partner currencies rebounding to its lowest level since early 2022.
According to data from Cointelegraph Markets Pro and TradingView, on July 1, DXY fell to 96.377, a level not seen in over three years, with the dollar strength gauge down more than 10% year-to-date.
However, these dismal achievements did not stop there—CryptoQuant revealed that DXY is hovering around a region not visited in over twenty years compared to its 200-day moving average (MA).
"Despite US debt reaching an all-time high, DXY has just hit a historic weakness, currently trading 6.5 points below its 200-day moving average, marking the largest deviation in the past 21 years," summarized writer Darkfost in a "Quicktake" blog post.
"While this may seem concerning at first glance, it often tends to favor risk assets like Bitcoin."
Bitcoin has often exhibited an inverse correlation with DXY throughout its lifecycle, but this relationship has become less clear in recent years.
Nevertheless, Darkfost believes this trend still exists as part of a broader investment pattern in risk assets.
"As the dollar weakens and loses its safe-haven appeal, investors reassess their portfolio allocations and shift capital towards alternative asset classes," he continued.
The accompanying chart illustrates the relationship between BTC price performance and DXY in relation to its 365-day moving average.
"This chart highlights the periods when DXY is below its 365-day moving average," Darkfost explained.
"Looking at historical data, it is clear that these periods are very favorable for BTC. We are currently in a phase where DXY weakness could drive a new round of BTC increases, but the price has yet to react."
As reported by Cointelegraph, the dollar's weakness is accelerating due to the implementation of US trade tariffs.
Meanwhile, for Bitcoin supporters, fiat currency is generally giving way to cryptocurrency.
"If the dollar is very strong, there is a reason to hold it," economist Lyn Alden said in an interview with Cointelegraph last week. "If total credit and total dollars in the system continue to increase over the next five, seven, or ten years, that is one of the macro factors that makes Bitcoin useful."
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Original: “Bitcoin (BTC) Gets ‘Highly Favorable’ Signals as DXY Sets 21-Year Weakness Record”
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