Forget Elon, this is why Bitcoin traders should pay attention to the US dollar index

Bitcoin (Bitcoin) The price fell by nearly 5% on June 4th and continued to fall into Friday’s trading hours as investors struggled to respond to Elon Musk’s mysterious tweets about cryptocurrencies, sparking speculation that Tesla’s CEO might sell the company The remaining 43,2000 BTC reserves.

Nonetheless, Bitcoin’s decline coincided with a sharp surge in the U.S. dollar index (DXY), sparking speculation that more than one factor accelerated the cryptocurrency’s sharp plunge late Thursday and early Friday.

Looking back, the U.S. dollar index, which measures the strength of the U.S. dollar against a basket of major foreign currencies, soared 0.18% after Musk’s push, reaching a three-week high of 90.627. At the same time, the price of Bitcoin plummeted by 9.31% during the same period, hitting an intraday low of $35,593.

The chart below illustrates Bitcoin’s direct response to Musk’s tweets-a big red candle on the hourly chart then continued to fall. However, although it did not fully respond to Musk’s anti-Bitcoin tweets, the U.S. dollar also began to rise due to the continuous rise in the traditional market, and finally set the largest one-day increase since September 2020.

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

What seasonal cryptocurrency traders think about Bitcoin As an anti-dollar asset, Mainly because the benchmark cryptocurrency is proposed as a safe haven to prevent the devaluation of legal tender. This statement mainly gained momentum after the global market crash caused by the COVID-19 pandemic in March 2020.

This incident prompted the Fed to adopt unprecedented support measures, including near-zero interest rates and an unlimited bond purchase program to protect the US economy from the impact of the pandemic.

At the same time, the U.S. government has successively launched three stimulus plans—US$2.8 trillion in March 2020, US$900 billion in December 2020, and US$1.9 trillion in March 2021—to help Americans through direct check payments. More likely to be on the road.

Monthly U.S. public debt since April 2020. Source: Statista

Expansionary policies have increased the US public debt burden from US$24.97 trillion in April 2020 to US$28.174 trillion in April 2021. As a result, since March 2020, the exchange rate of the U.S. dollar against major currencies has plummeted by more than 12.5%. At the same time, Bitcoin’s performance was also located in the north of 855% during the period.

The overnight drop in the Bitcoin market on Thursday confirmed the short-term negative correlation with the U.S. dollar in the short term.

However, on the weekly chart, these two assets continue to The opposite trend Remind each other that Musk holds $1.3 billion in BTC in the $690 billion market, which has nothing to do with more pressing macroeconomic issues (including inflation).

Since March 2020, the negative correlation between Bitcoin and the U.S. dollar index has remained intact. Source: TradingView

Elon Musk is a stage

Tesla continues to work hard to get revenue from the sales of its electric vehicles, which shows the company’s first quarter documents. Of the $594 million it reported, less than $100 million came from its actual business-on the other hand, the rest came from the sale of its profitable BTC assets (approximately $272 million) and regulatory credit.

In short, Musk’s Bitcoin game is similar to a retail game.

So far, the billionaire entrepreneur has viewed cryptocurrency as a tool to offset the company’s poor performance.

This was even more evident in his passing move of accepting BTC as payment, and then tweeted that he might let Tesla sell all of his Bitcoin assets, further leading to the meme of his breakup-which happened to be According to reports in the global media, sales of Tesla cars in China have fallen by 50% due to quality problems.

But Musk’s influence on the Bitcoin market diminished with each of his anti-crypto tweets, which proves that the scale of cryptocurrencies is declining.For example, his mid-May Twitter spat With the emergence of cryptocurrency influencers, the BTC/USD exchange rate fell from as high as $58,000 to $30,000-a decline of about 42%. But even so, the currency pair later recovered nearly 30% of its losses.

In contrast, the latest Elon Musk candle finally erased only $3,500 from the Bitcoin valuation, with an intraday loss of about 9%.

Therefore, driven by the anti-dollar fundamentals that initially attracted companies such as Tesla to join, Bitcoin continued to rise for a long time. It is expected that President Biden’s $6 trillion government spending plan will provide more bullish clues to cryptocurrencies, which will further increase the downward pressure on the U.S. dollar.

Currently, cryptocurrency is still in a technical dilemma, waiting for Decisive move Beyond the current range of US$32,000 to US$40,000. Musk is old news. Keep going, Bitcoiners.

This article does not contain investment advice or recommendations. Every investment and trading action involves risks, and readers should research on their own when making a decision. The views, thoughts, and opinions expressed here are only those of the author, and do not necessarily reflect or represent the views and opinions of Cointelegraph.