Bitcoin (BTC) made another attempt 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.
The DXY is now in a “parabolic rally”
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.
It was recommended 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. Good to wait for confirmation first if you decide to take the trade IMO,” plot the popular Twitter account, Daan Crypto Trades.
“Only a strong break and recovery of $40,600 would make me see higher targets,” added his colleague, Crypto Ed.
“Charts: Mostly pointing down. Liquidity: A squeeze to the upside to catch the shorts.”
However, 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 doesn’t bode well for risk assets like stocks and Bitcoin. Until the rally cools down, playing defensive is the way to go,” warned commentator Benjamin Cowen.
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.
US Dollar Currency Index (DXY) is rising and parabolic.
Started peeking at other currencies, and was looking at the Euro vs USD (EURUSD). And realized… I’ve seen this before. This was how the bottom looked in the crypto market before the big reversal happened after C-19. pic.twitter.com/M8uxBYZXX0
— Blockchain Backer (@BCBacker) April 28, 2022
A change in the trajectory of the dollar should be good for Bitcoin, according to theory, and Cointelegraph contributor Michaël van de Poppe forecast that you will do “very well” in such circumstances.
Analyst: Dollar will fall apart in next ‘major currency crisis’
Meanwhile, the rising dollar raised concerns about repercussions in other economies.
If instability 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,” predicted on April 27 Brent Johnson, CEO of Santiago Capital.
“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.
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