Bitcoin price is experiencing a pullback as this content is being typed. But after last night’s close in the DXY Dollar Currency Index, the top cryptocurrency could be cleared for liftoff.

The dollar lost a key level that in the past that led to some of the largest rallies in BTC history.

Correlations Between Crypto And Fiat Currency

Correlation is commonly found to some degree across almost all assets. It is rare that two assets show no correlation, and instead tend to exhibit strong and weak, positive and negative correlations.

Technical analysts or investors look at asset correlations for diversification purposes, and to reduce risk in a portfolio. For example, a crypto-heavy portfolio wouldn’t benefit much from adding tech stocks due to a strong correlation. It could even increase risk as an entire portfolio draws down at once.

Few assets are as negatively correlated as Bitcoin versus the dollar. This is because the most dominant trading pairs feature both BTC and USD. In the trading pair BTCUSD, BTC is the base currency, and USD is the quote currency.

This is precisely why the DXY Dollar Currency Index losing a key level could have a dramatic impact on the price per BTC.

The dollar has lost the middle-Bollinger Band | DXY on TradingView.com

Why The Dollar Dropping Means Bitcoin Popping

The DXY Dollar Currency Index is a weighted basket of top currencies from around the globe. None of which are Bitcoin. However, there is no better measure of the strength of the dollar than the DXY.

In technical analysis, higher timeframes produce the most dominant signals. Not all timeframes are treated equally, so experimentation can provide early clues about what’s to come. For example, the 4-week timeframe trims just 2-3 days off each one-month interval. This timeframe y

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Author: Tony "The Bull"

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