Why Bitcoin Weakness Is Attributed To Dollar Strength

The bitcoin price is currently in decline and may lose support for $56,000. However, could this be more due to the strong dollar than the current weakness of the crypto market?

TD Sequential Triggers Anticorrelated Signals For BTCUSD, XY

A few weeks back, we asked if the Dollar Currency Index hitting new highs for 2021 would be a risky situation for Bitcoin. BTC’s price dropped more than $10,000 each time it was sold. The answer was yes.

But much like the cryptocurrency uptrend in late 2020 and early 2021 came to an abrupt halt, even the dollar’s short-term destruction must at some point come to a full stop.

Read More: Ten Bullish Monthly Bitcoin Price charts to start November| 10 Bullish Monthly Bitcoin Price Charts To Start November

The potential for a reversal is here, according to the TD Sequential – a market timing indicator created by Thomas Demark. It works on the principle that when a particular sequence of candles is created, then conditions for a reverse are satisfied.

This is usually indicated by either a 9 or 13 countdown. However, the 8th candle before the 9 can also yield such results, and truly the tides can change at any point – the tool just highlights when that is most likely to occur. 

In the chart below, both Bitcoin and the DXY have opposing signals – making the probability for a reversal in each asset all the more likely.


A reverse TD set-up could lead to a reversal. Source: TradingView.com| Source: DXY on TradingView.com

Bitcoin Strength, Bitcoin Weakness

In the chart above, there are some important things to note that might suggest the reversal isn’t quite ready. For example, the DXY hasn’t “perfected” its 9-count. Bitcoin prices are currently on an 8-count but have been “perfected”.

The final candle in a series is considered complete when it surpasses the previous candles. While a well-constructed setup doesn’t guarantee results, it can increase your chance of success.


Bulls ascend the stairs, while bears go down the elevator | Source: BTCUSD on TradingView.com

Bitcoin prices are not at risk of experiencing a bigger reversal until the daily uptrend resistance is broken. The stair-stepping pattern above would be broken with a close below $54,000 – such step-like patterns weren’t violated during past uptrends until they were confirmed to be over.

Related reading: Are New 2021 Highs of the Dollar Index Dangerous for Bitcoin?| Is The Dollar Index Making New 2021 Highs Dangerous For Bitcoin?

Bitcoin’s dramatic fall after new highs could well be caused by strength in the US dollar and less so weakness in the original cryptocurrency. When Bitcoin reached these levels last year, the DXY was far more valuable than the USD. With the DXY making a comeback, the king of cryptocurrency isn’t looking quite as strong as it once was.

The article’s purpose is to draw attention to the TD Sequential’s count of both assets. This may make the shift in strength/weakness a short-lived one.

Follow @TonySpilotroBTC on Twitter or join The TonyTradesBTC TelegramGet daily market insight and expert technical analysis education. Please note: Content is educational and should not be considered investment advice.

Featured image taken from iStockPhoto. Charts taken from TradingView.com

Get more Crypto News at CFX Magazine