The dollar money index breaks resistance and reaches its highest level since 2002, to the detriment of practically everything.
Bitcoin (BTC) attempted again to break above the $40,000 mark on April 28, as Wall Street opened to a twenty-year high on the strength of the dollar.
Data from Cointelegraph Markets Pro and TradingView showed that the BTC/USD pair reached a high of $39,883 on Bitstamp before momentum ebbed, causing the pair to lose $800 in no time.
Traders had anticipated what they saw as a relief bounce, with the implication that the subsequent rejection would cause the downtrend to continue.
The main recommendation was to operate with caution on the day.
“BTC is currently consolidating on this falling wedge. In the event of a breakout, I would be targeting $42,000. It is good to wait for confirmation first if you decide to take the trade IMO,” popular Twitter account Daan Crypto Trades argued.
“Only a strong breakout and recovery of $40,600 would make me see higher targets,” added his colleague, Crypto Ed.
The DXY is now in a “Parabolic Rally”
With little movement in Bitcoin, the focus was fully on the US dollar, which continued to outperform itself as the dollar currency index (DXY) hit its highest levels since 2002.
“DXY’s parabolic rally does not bode well for risk assets like stocks and Bitcoin. Until the rally cools down, playing defense is the way to go,” commentator Benjamin Cowen warned.
Others agreed that DXY was now “parabolic”, while trading guru Blockchain Backer saw similarities between the current setup of the dollar against other currencies and the immediate aftermath of the crash of various assets following the start of the COVID-19 pandemic in March 2020.
A change in the dollar’s trajectory should be good for Bitcoin, the theory goes, with Cointelegraph contributor Michaël van de Poppe forecasting that it will do “very well” under such circumstances.
Analyst: The Dollar Will Fall Apart in the Next “Great Currency Crisis”
Meanwhile, the rising dollar raised concerns about repercussions in other economies.
If lack of stability enters the scene, volatility could again hit risky assets that are already at the mercy of central banks’ anti-inflation policy. Ironically, the spark could be Japan, where the central bank continues to print money.
“Whatever path the yen takes from here, chaos will follow,” Brent Johnson, CEO of Santiago Capital, predicted on April 27.
“If capital flows back into Japan and pulls back to the support line, it’s a rug pull on funds allocated to the rest of the world. If it continues to fall, it puts pressure on the PBOC to drop the yuan as well. Neither of these options is good…”
The Japanese yen also traded at 20-year lows on April 28.
“What do Keynesian investors do in a crisis? They rush to dollars thinking they are safe,” added Alasdair Macleod, head of research at precious metals trading firm Goldmoney.
“Almost every investor and money manager has been brainwashed into thinking like this since the Nixon shock. This morning the JPY decline accelerates.”
Macleod saw what he called a “major currency crisis” coming, which would gobble up dollar strength “next” as the fate of the yen, euro and sterling followed.
By Audy Castaneda
