1/ The US dollar index is ripping higher. Some people are worried that this is bad news for #Bitcoin.

Don’t. There is no direct relationship between the DXY and BTC.

Quick 🧵
2/ The US dollar index is a weighted average of the exchange rates between the USD and the currencies of some selected trading partners.
3/ The composition of this weighted average is:
🟠 57.6% EUR
🟠 13.6% JPY
🟠 11.9% GBP
🟠 9.1% CAD
🟠 4.2% SEK
🟠 3.6% CHF

I don’t see no #BTC in there.
4/ The point of the DXY is that it reflects the relative strength of the USD with respect to other currencies.

This strength is based on differential monetary policies, relative deficits, trade balance and so on.
5/ E.g. the big move from 80 to 95 that started around 2014 was largely driven by the big difference in the monetary policies of the ECB vs the Fed at the time.
6/ So the factors affecting changes in the US dollar index are pretty far removed from what’s driving the value of Bitcoin.
7/ There could be secondary mechanisms that would make BTC and the DXY somehow anti-correlated.

For the most part Bitcoin exchanges operate with stablecoins that are stable with respect to the USD...
8/ ... so you could argue there is something to do with non US actors being influenced by the strength of the dollar in their trading behaviour.

But honestly I can’t come up with anything convincing.
9/ And actually if you stare long enough at the chart below, there does not seem to be any consistent correlation between trends in the DXY and trends in BTC.
10/ So at best the US dollar index is a secondary driver for BTC/USD and not something to be worried about compared to say:
🟠 The supply shock.
🟠 Whales making moves.
🟠 The amount of leverage in the market.
🟠 ...
END/ So that’s it. If you want more macro analysis on Bitcoin and digital assets then go checkout the newsletter, I write about these topics twice a week 👇

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More from @ecoinometrics

2 Oct
#Bitcoin after the Halving
Oct. 02, 2021

508 days after the 3rd halving
#BTC at $47,883

Despite lagging behind the growth trajectory of the previous cycles, Bitcoin remains pretty resilient... 1/4
2/4 We are one month away from the longest drawdown in #Bitcoin's history outside of an end-of-cycle bear market. 👇
3/4 But if we compare to previous drawdowns, it looks like we are already in the recovery phase of the move.

#Bitcoin might only need a little push to go back to its all-time high of April. 👇
Read 4 tweets
21 Sep
1/ After the price action we have seen today, it is good to remember that #Bitcoin is exposed to the risk of liquidity events in the broader market.

That means if the SP500 dips significantly, leveraged traders will definitely sell some BTC to raise cash.

See March 2020. 👇
2/ Right now with the increased likelihood that the Fed will start tapering their purchasing program we get a higher chance of a significant corrections in the stock market.

Let’s remember that the Fed’s balance sheet is up $4 trillions in two years...
3/ So what happens when cash stops flowing in?

Read 8 tweets
19 Sep
#Bitcoin after the Halving
Sep. 19, 2021

495 days after the 3rd halving
#BTC at $47,720

1/ For the past few months this cycle has been lagging behind the previous ones.

However most metrics point towards the fact that we are due for another leg up. Image
2/ That being said, in 40 days this drawdown will become the longest #Bitcoin has ever experienced outside of a bear market. 👇 Image
3/ But the price trajectory shows a well known pattern of recovery.

So #BTC might very well move towards a new all-time high this fall.
Read 4 tweets
11 Sep
#Bitcoin after the Halving
Sep. 11, 2021

487 days after the 3rd halving
#BTC at $45,596

1/ It has been 151 days since BTC hit its all-time high... 👇
2/ We are 50 days away from this correction being the longest drawdown #Bitcoin experienced in a post-halving bull market... 👇
3/ But the recovery is well underway. If we get some catalyst for FOMO to kick in, who knows, #Bitcoin could even do a repeat of 2013. 🚀

One can hope🤞...
Read 4 tweets
28 Aug
#Bitcoin after the Halving
Aug. 28, 2021

473 days after the 3rd halving
#BTC at $48,583

1/ Some resistance at $50k. This is not totally unexpected but still...
2/ ... the recovery from the bottom of this correction is well underway.

We can hope that there will be some repeat of 2013 when #BTC came out strong from a -60% drawdown in the middle of the post-halving bull market.
3/ If that's the case, this drawdown will probably be the second longest one that #Bitcoin ever experienced outside of a multi-year bear market.
Read 5 tweets
26 Aug
#Bitcoin after the Halving
Aug. 26, 2021

471 days after the 3rd halving
#BTC at $46,995

1/ Some difficulties to push past $50k. Not entirely surprising when we look at some on-chain data... Image
2/ The addresses controlling 10 to 10k #BTC have been accumulating more slowly. In particular the whales have turned neutral on a 30 days basis. Image
3/ Again, the question is to know if this is temporary or if we'll get a bigger divergence between whales and small fish.

Obviously if everyone was pulling in the same direction this would be better for #Bitcoin's price action. 🤷‍♂️ Image
Read 4 tweets

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