Veteran trader highlights important movement of financial market that may affect cryptocurrencies
Veteran trader Peter Brandt has shared a chart of the US Dollar Index showing the world’s major currency breaking through the resistance that previously existed. Without commenting on DXY’s influence on cryptocurrency markettraders are already expecting major pressure on Bitcoin and other cryptos on Monday.
Unpleasant correlation
Thanks to TradingView’s comparison tool, we can clearly see a reverse correlation between Bitcoin and DXY. Wherever the U.S. Dollar is showing strength on the market, Bitcoin tends to retrace from local tops and resistance.
The main reason behind such a trend is simple: investors choose less volatile assets whenever the US currency is strong and prefer to take slow and steady income from tools like bonds rather than exposure to risky assets. like cryptocurrencies.
Fed’s hawkishness taking shape
Thanks to the most recent rate hike and upcoming hikes until 2023, the U.S. Dollar is feeling comfortable compared to the rest of the world’s currencies. We are most likely to see the continuous strengthening of the currency in the future and lack of inflows into risk assets and markets.
According to last week’s institutional net flows, large investors are moving away from the cryptocurrency market, also due to the rally of the US dollar in the market. Investors withdrew nearly $500 million from the cryptocurrency industry after the flash crash of assets like Bitcoin and Ethereum.
Luckily, institutional investors often end up as a minority of the buying power on the cryptocurrency market as large retail investors and funds that operate solely on the crypto market can push the price of the digital gold up even without the help of traditional institutions.
