Bitcoin is trading for over $ 20,000, but the start of what could be the first real correction could emerge since the beginning of the uptrend. However, if you take a closer look at the DXY Dollar Currency Index, the leading cryptocurrency by market capitalization can be extended one more time bear phase when a fractal occurs on the dollar chart.
Could fear associated with the latest form of the coronavirus and more potential lockdowns trigger another Black Thursday-style flight to the dollar?
Bitcoin Safe Haven story at risk as Greenback’s momentum shifts
2020 has been the year of the great search for the next safe haven. When the pandemic first struck and panic took over the markets, investors cashed in assets to the safest haven humanity currently knows: the US dollar.
As a global reserve currency and due to its overall stability, it is considered a safe haven next to the Swiss Franc and Japanese yen. Outside of fiat and forex currencies, precious metals enjoy safe haven status, and both gold and silver are shining examples – figuratively and literally – of strong performance during economic uncertainty.
But for the first time in history, Bitcoin was also part of the safe haven conversation, thanks to the digital scarcity of cryptocurrency and the attributes that make it an ideal store of value.
Gold set a new record early this year, but after that it was all about Bitcoin. The cryptocurrency is up 500% from the Black Thursday low in 2020 alone, crushing the performance of all other safe havens.
But back with fear and uncertainty because of a new, more contagious, mutated strain of COVID called VUI-202012/01 or line B.1.1.7, Bitcoin is already pulling back, and the dollar is reawakening, according to the DXY Dollar Currency Index.
Bitcoin price action is layered behind the detailed technical chart of the DXY | Source: DXY on TradingView.com
The dollar is emerging from slumber, may return crypto Bear Links
The DXY Dollar currency index is a basket of the best global forex currencies weighted against the US dollar. The index does a good job of providing a base snapshot of the dollar’s strength or weakness.
2020 has not been a good year for the global reserve currency. More than 30% of all US dollars in circulation have been depressed this year, and it has sparked fears of inflation among institutional investors.
Related reading | Five technical reasons why the Bitcoin Bull trend is taking a breather
It has pushed many of them towards Bitcoin, which trades directly in opposition to the dollar on its main base currency pair. But one fractal forms on the DXY, that could mean the dollar is on the verge of reversing, and it could potentially produce another one bear phase to Bitcoin and crypto.
An almost exactly falling wedge pattern that matches what is now forming on the DXY has previously fallen apart after a few hidden bullish divergences. The last big bull div and dollar reversal Bitcoin bear market from $ 20,000 to $ 3,200 while the dollar regained strength.
The dollar’s weakness in 2020 caused the same assets to run from $ 3,800 to $ 24,300 in less than nine full months – what could a return to strength do with the cryptocurrency expected to break out into another bull run?
Featured image from Deposit Photos, Charts from TradingView.com