Bitcoin Waits as Dollar Begins Crucial Week

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  • Bitcoin is poised for activity as the U.S. Dollar Index begins a crucial week
  • If the DXY has topped out, Bitcoin will enjoy a bounce
  • Other factors suggest that the tedium is about to be ended – one way or another

Bitcoin and traditional stocks are waiting to see what the U.S. Dollar Index will do this week as the first signs of optimism so far this year start to spread through the space. Some are starting to believe that, with Bitcoin’s price compressed and the dollar index (DXY) heading towards a potential top, Bitcoin’s time could finally have come 11 months into the bear market.

Dollar Pullback or Just Another Upwards Step?

The DXY reached 114.8 last week, the highest value for more than 20 years, before pulling sharply back to 111.5::


What Bitcoin and traditional assets are waiting to find out is to see if the support at 111.5 represents a lower high or a higher low, which will go a long way to determining if the top is in for the U.S. Dollar. If the top is indeed in then we can expect a failure to break through 113.5 and a return to the key support at 110. This should result in a brief rally for Bitcoin and stocks.

However, if the DXY surpasses this region then it’s likely that the 120 top will be tested, in which case Bitcoin and the asset market can expect either more pain or more stagnation.

Bitcoin itself has been in typical bear market territory, using the 2017 high as a baseline and stagnating within it:


What is of note however, is that it is approaching the downtrend that began back at the November 2021 high:


Historically, this has been very good news for Bitcoin, with the last such occurrence leading to a 42% jump:


Volume Profile Suggests Volatility Incoming

Of course, in the current economic conditions we can’t expect a bounce of such proportions this time round, but, along with the dollar looking like it is approaching a top, there are other signs that Bitcoin is preparing for a major move. Another piece of evidence is the volume profile, which shows that both buying and selling has picked up enormously in the past month or so, even while Bitcoin has been doing nothing:


This shows that volatility is on the way, although bulls would do well to remember November 2018 when the price crashed 50% after 11 months of bear market. With September having turned into October, we are now in that 11th month, and the price action is not looking dissimilar.