- Bitcoin has approached crucial support at $19,000 overnight
- All of July’s gains have been erased in August
- The U.S. dollar rally continues to squeeze assets and doesn’t look like stopping soon
Bitcoin dropped close to key support overnight as the U.S. Dollar Index showed a worrying sign of strength. Bitcoin fell briefly to $19,556 while the dollar continued its parabolic rise, with only one last area of resistance to clear before the path is set for a potentially asset-crushing 10% move. An equally concerning picture is also playing out with the total crypto market cap, which is on the verge of turning support into resistance at the $903 billion level.
Bitcoin Has Retraced July’s Gains
Having failed to remain above the key resistance area of $22,800, Bitcoin has retraced all of the positive price action since July, and is on the verge of testing the crucial support area at $19,000:
With very little fundamentally good news expected to bolster it, there is every chance that this barrier gets broken for the first time since the June collapse, with the reaction after that proving crucial. If Bitcoin wicks down and back up into the yellow box again like it did in June then that’s a sign of a fake out and a liquidity grab, which is nothing to worry about.
However, if it fails to get back above the yellow box then that will mean it is suddenly acting as resistance and lower numbers are to come.
Something like the latter may already be playing out with the total market cap, which looks like it is about to turn support from July back into resistance again:
As we can see, if this reverts to the prior pattern in June, we could be looking at hundreds of millions more being wiped off the crypto markets.
Dollar Strength Scaring Markets
One of the major reasons why crypto is suffering so much is because of the incredible strength of the U.S. Dollar Index. Since its double bottom completed in May last year, the DXY has been on an absolute tear, experiencing just four red weeks in 14, and the 15th has started remarkably well too:
Everyone in investing circles knows that a strong dollar is a recipe for an asset bear market, and crypto is no different. The dollar has been on a Bitcoin-style mega rally for well over a year now, a situation that is only going to continue with the Federal Reserve engaging in more extreme quantitative tightening. This and other measures will very likely see the U.S. Dollar Index break through this resistance at 109 and continue up to the 2001-2002 double top at 120.
Then, and only then, will it be even remotely safe to jump back into the crypto pool – if only temporarily.