As the dollar index (DXY) looks set to confirm a golden cross, the Bitcoin (BTC) price is on track to drop below its 200-day simple moving average, confirming a so-called death cross. According to Alex Kuptsikevich, the senior market analyst at FxPro, such a signal suggests a further decline, emphasizing the bearish trend here. While a Bitcoin death cross is usually seen as a bearish indicator, history shows that it is unreliable as a standalone indicator. In the past, only two out of nine death crosses led to negative returns over three-, six- and 12-month timeframes.
The death cross is happening just as the dollar index appears on pace to chalk up a golden crossover amid a worsening macroeconomic outlook for risk assets. The DXY has risen 5.3% to 104.90 since mid-July, hitting the highest since March 15. Bitcoin, on the other hand, has declined 19% in the same period. The U.S. dollar is the global reserve currency, accounting for most global trade, non-bank borrowing and international debt. This means a rally in the U.S. dollar causes financial tightening worldwide, putting downward pressure on risk assets.
I’m finally turning more constructive on crypto (yes, I see the prices), but I fear we must first get through a tricky inflection point on the macro side, said Ilan Solot, co-head of digital assets at Marex Solutions. The risk is a serious flush out of longer-dated yields and growth assets causing temporary re-coupling crypto as the new sock puppet proxy for quant traders.