Forget about Elon, so Bitcoin traders should watch the US Dollar Index instead


Bitcoin (BTC) prices fell nearly 5% on June 4 and continued the decline in Friday’s session as investors grappled with Elon Musk’s cryptic tweets about the cryptocurrency, which sparked speculation that the Tesla- CEO could dispose of the company’s remaining 43,2000 BTC supplies.

Nonetheless, Bitcoin’s downward movement also coincided with a sharp rise in the US Dollar Index (DXY), fueling speculation that more than one factor accelerated the cryptocurrency’s dramatic collapse during the late Thursday and early Friday session.

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Looking back, the US dollar index, which measures the strength of the greenback against a basket of top foreign currencies, rose 0.18% to hit a three-week high of 90.627 on Musk’s tweet. Over the same period, Bitcoin prices plunged 9.31%, hitting an intraday low of $ 35,593.

The graph below illustrates Bitcoin’s immediate response to Musk’s tweet – a large red candle on the hourly charts, followed by extended declines. While the dollar isn’t solely responding to Musk’s anti-Bitcoin tweet, it also rallies on sustained upward bids in traditional markets, and eventually sees its biggest daily gains since September 2020.

Bitcoin’s decline after Musk’s tweet also coincided with a rebound in the U.S. dollar index market. Source: TradingView

Seasonal cryptocurrency traders perceive Bitcoin as an anti-dollar asset, largely because the benchmark crypto is proposing to work as a haven against fiat devaluation. The narrative has gained momentum, especially after the global market crash caused by the COVID-19 pandemic in March 2020.

The event prompted the Federal Reserve to take unprecedented supportive measures, including near zero interest rates and unlimited bond purchase programs, to protect the US economy from the aftermath of the pandemic.

Meanwhile, the U.S. government has launched three consecutive stimulus programs – $ 2.8 trillion in March 2020, $ 900 billion in December 2020, and $ 1.9 trillion in March 2021 – more likely to help Americans through direct check payments to help.

US national debt month after month since April 2020. Source: Statista

Expansionary policies increased the US public debt burden from $ 24.97 trillion in April 2020 to $ 28.174 trillion in April 2021. As a result, the dollar’s strength against major currencies has increased by more than 12.5% ​​since March 2020. decreased period is in the north by 855%.

The overnight decline in the Bitcoin market on Thursday confirmed a brief negative correlation with the US dollar for a short period of time.

However, on the weekly chart, the two assets continue to trend opposite each other, reminding us that Musk, with his $ 1.3 billion BTC exposure to a $ 690 billion market, is facing much more pressing macro concerns, including the Inflation, remains irrelevant.

Negative correlation between Bitcoin and US dollar index intact since March 2020. Source: TradingView

Elon Musk is a phase

Tesla continues to struggle to generate revenue from sales of its electric vehicles, the company’s first-quarter reports show. Of the $ 594 million reported, only less than $ 100 million came from actual business – the remainder came from the sale of its profitable BTC holdings (~ 272 million) and regulatory loans.

In short, Musk’s Bitcoin game is similar to that of a retailer.

The billionaire entrepreneur has so far treated cryptocurrency as a tool to offset the underperformance of his company.

That becomes even clearer with his flip-flop steps accepting BTC as payments, followed by tweets that he may let Tesla drain all of its Bitcoin holdings, which further leads to his breakup meme – which arrives the same day, by the way as the global media reported about a 50% decrease in Tesla car sales in China due to quality issues.

But Musk’s influence in the bitcoin market is waning with each of his anti-crypto tweets, proving the extent of the cryptocurrency’s decline. For example, his Twitter spit with crypto influencers in mid-May caused the BTC / USD exchange rate to plummet from as much as $ 58,000 to just $ 30,000 – a drop of about 42%. But even then, the pair later reduced nearly 30% of those losses.

By comparison, Elon Musk’s latest candle wiped just $ 3,500 off the Bitcoin valuation and posted an intraday loss of about 9%.

As a result, Bitcoin continues to trade higher over the long term, fueled by the same anti-dollar fundamentals that primarily attracted companies like Tesla. Further bullish signals for the cryptocurrency are expected from President Joe Biden’s $ 6 trillion government spending package, which would put further pressure on the US dollar.

For the time being, the cryptocurrency remains in a technical limbo and is waiting for a decisive step out of the current range of 32,000 to 40,000 US dollars. Musk is old news. Keep it up, Bitcoiner.

This article does not provide investment advice or recommendations. Every step of investing and trading involves risk, and readers should do their own research when making a decision. The views, thoughts, and opinions expressed herein are those of the author alone and do not necessarily reflect the views and opinions of Cointelegraph.