US dollar falls to 4-month low as bitcoin trader predicts 10% drop to come
Bitcoin (BTC) may enjoy a familiar tailwind in the coming weeks and new macro forces continue to play out.
In a December 14 post on XX (formerly Twitter), prominent trader CryptoEd, founder of trading group CryptoTA, noted a multi-month decline in the strength of the US dollar.
Bitcoin trader targets sub-100 DXY dive
Bitcoin and dollar strength have shown an inverse correlation in the past. While this has slowed recently, changes in US macro policy are now widely seen as boosting bitcoin but will put pressure on the greenback going forward.
Cointelegraph reports that the week's macro data releases, coupled with encouraging signals from the Federal Reserve, have analysts pointing the way for the crypto market to surge in 2024.
This is thanks to declining inflation, which allows the Fed to “move” on interest rate hikes by increasing liquidity for risk assets.
An asset not set to cheer after the move was the dollar, which fell sharply this week as macro figures showed the impact of monetary tightening on inflation.
The U.S. dollar index ( DXY ) is down more than 2 percent since the start of the week, currently below $102 – its lowest level since mid-August.
Commenting, Crypto Ed joined Bitcoin optimists as he predicted further negative pressure on the DXY.
“What Will Help Send BTC To New ATH's On The Long-Term View For DXY,” he wrote, citing new all-time highs for BTC/USD.
“DXY to $92.”
The accompanying chart is assigned key levels to look for on the DXY in three-day timeframes.
The Fed's balance sheet is higher.
On the liquidity issue, however, economist Lynn Alden argued that conditions are not yet favorable to support a broad risk asset renaissance.
RELATED: Bitcoin Bulls Eye As Cash Inflows Reel In Late 2020, BTC Price Returns
“Global indicators of liquidity are starting to ease a bit after their recent highs, and reverse repos haven't dried up in the first half of December, but today's dovish drop in the Fed and DXY could start a little more liquidity,” she told X Subscribers in December. she said. 14.
Days later, Alden issued a “remarkable condemnation” of markets, looking at how he might cut the Fed in 2024.
The DXY is down again today, and crude oil and other commodities are getting little relative growth.
The past 24 hours have seen a dramatic reversal of market expectations for forward rates. pic.twitter.com/Wz9alU3hGe
— Lyn Alden (@LynAldenContact) December 14, 2023
Data from the Fed showed that balance sheets expanded in December for the first time since August — by about $2 billion.
BTC/USD, meanwhile, traded at $42,700 at the time of writing on December 15, remaining relatively flat after entering short volatility the previous day. The pair rose 13 percent in December, according to data from Cointelegraph Markets Pro and TradingView.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
