Amid the possibility of a new COVID-19 variant on the horizon, all financial markets took a heavy pounding, and as a result, the US dollar index is now approaching a very historical resistance at 97.73. When it comes to Bitcoin and the DXY, which is the dollar index, these tend to show a negative correlation with each other. If there is a bearish retreat for the dollar index, then it automatically means that the Bitcoin bull market will continue and will elongate.
The dollar index has been doing great for the past couple of years, but in 2021 at the hit of the COVID-19 pandemic, it retreated to some of the lowest resistance levels, but somehow it has managed to keep its head above the water and is now approaching a very important resistance level. If the dollar index is able to cross it, then it would mean prosperity and consistent momentum for the index and not for the crypto market.
The very reason is that both of these are in negative correlation with each other, but if somehow the resistance can’t be crossed, then it means the dollar index would continue to deflate and Bitcoin, as a result, would gain so much momentum and even a Bullish market might be in order. It is just never clear why the dollar index is a negative correlation with Bitcoin. It has never been like this before as at some instances there was no correlation with bitcoin and dollar index, at times both were at a positive correlation with each other, and at other intervals, both were in a negative correlation as these are today.
The years which are said to be extremely productive in terms of the price of Bitcoin shooting up are the years when the dollar index was at its weakest and always in a bearish crisis. So evidently, for an asset to do better and remain consistent in trading, the other one has to do badly and vice versa. According to many financial analysts, it is possible that the dollar index might not be able to cross the resistance level, and it would mean an elongated or extensive approach of the bullish market for Bitcoin, but at the same time, there is a possibility that it just might not happen this way.
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