The cryptocurrency market has had a difficult week, mainly because of the Terra ecosystem crash and its knock-on effects on Bitcoin (BTC), Ethereum(ETH) and other altcoin prices. Also panic selling after stablecoins lost the peg to US dollars.
Since late 2021, the bearish headwinds to the crypto market have been growing as the U.S. Dollar gained strength and the United States Federal Reserve suggested that it would increase interest rates throughout the year.
A Delphi Digital report recently stated that the DXY’s 14-month RSI has “crossed over 70” for the first time since late 2014 or 2016.
Performance of the DXY index. Source: Delphi Digital
This is significant because eleven of the 14 previous instances “led to a stronger Dollar 78% of time over the next 12 months,” which suggests that assets may be suffering more.
The DXY Index gained approximately 5.7% on average after its RSI rose over 70. This reading, from May 13, “would place the DXY Index just short of 111, its highest point since 2002.”
BTC/USD vs. DXY Index, inverted and a rolling 60 day correlation. Source: Delphi Digital
Delphi Digital said,
“Assuming that the DXY-BTC correlation remains strong, this wouldn’t be good news for the crypto market.”
Bitcoin is at the bottom of the price cycle
BTC is now retesting the 200-week exponential moving mean (EMA) at $26,990. This has been “historically served to be a key area of price bottoms,” according to Delphi Digital.
BTC/USD vs. 20-week EMA vs. the 14-week RSI. Source: Delphi Digital
Bitcoin is also holding above its weekly support range between $28,000 and $30,000 for the long-term, which has been a strong support area during recent market turmoil.
Many traders panic-sold in the last days. However, Pantera Capital CEO Dan Morehead took a contrarian approach and stated, “It is best to buy when [the] trend is well below it.” This is one of those times.
Inflows of Bitcoin funds are related to the price trend. Source: Twitter
Since Dec 2010, Bitcoin has been “cheap” or “less expensive” relative to the trend for only 5%. Go the opposite way if you have the financial and emotional resources.
Delphi Digital cautioned that the best deals or opportunities in the market do not last long.
BTC traded in the $28,000-$30,000 range for a long time. This means that “the longer we observe price rise in these areas, the more likely it is that there will be continued trading.”
If there is further decline, the “weekly and volume structure support at $22,000-24,000” and “2017 all time high retests at $19,000-24,000” will be the next areas of support.
Delphi Digital said,
“Early signs that we are nearing the tipping point of maximum pain are beginning to show, but we don’t know if we’re there yet.” You should do your research before making any investment or trading decision.
Eileen Wilson –Technology and Energy
My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of topmagazinewire.com with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.