DXY’s Collapse Signals Bigger Bull Run
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This week, the U.S. dollar index (DXY) recorded one of the biggest three-day negative performances in recent history. DXY has dropped -5.4% since Monday, down from 109.881 to 103.967, a bullish turning point that some market observers interpret as Bitcoin. Real Vision’s chief crypto analyst Jamie Coutts draws on historical comparisons and believes that the sharp decline in DXY may herald a significant growth in the world’s largest cryptocurrency through market cap.
DXY’s Historic Decline Signal is a Major Bitcoin Rally
coutts propose The discovery of two historical backtests on X introduces in detail the results of similar DXY drops that match the critical moments of the Bitcoin price cycle. “When looking at this recent move by DXY through a historical lens, anything except bullish, was challenging. I made a signal screen with a 3-day negative action of over -2% and -2.5% and found that they both occurred in the Bitcoin bear market (turning point) or the medium-term bull market (trend continuation).” Although the statistical significance is limited by Bitcoin’s relatively short Transaction historyCoutt stressed that these data points are still worth considering.
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In his first backtest, the decline in coverage DXY was more than -2.5%, which Coutts has discovered eight times since 2013. During the 90 days after these declines, Bitcoin rose every time, giving it a perfect 100% win rate. The average yield is +37%, which will translate into a BTC price of about $123,000, while a standard deviation moves beyond the average to +63% (approximately $146,000 BTC). Even in the worst case, Bitcoin still managed to earn 14%, putting it in about $102,000.
In his second focused test, the decline with DXY was more than -2.0%, with 18 incidents since 2013, and Bitcoin has risen 17 times with a 94% win rate. The average 90-day yield is +31.6%, close to $118,000 of BTC, while a standard deviation relocation is +57.8% (approximately $141,000). The worst 90-day return after this DXY drop is -14.6% (approximately $76,500).
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Coutts acknowledges that these countertests do not provide assurances, “I made a bold call yesterday and yesterday about the new highs before May. I tried to base the predictions on strong data points. OFC may be different this time. Let’s take a look.”
Analysts often see DXY drops As a sign of improving risk appetite in global markets, it can benefit alternative storage of value and risky assets, including Bitcoin and other cryptocurrencies. The sudden retreat of the dollar index follows regulatory issues and Bitcoin’s challenging February, but Coutts insists that the bigger trend looks very similar to the historical point of the revival.
He also noted in an article the day before: “Don’t think people understand the importance of DXY moves in the past three days, what does that mean for Bitcoin. (…) DXY saw its fourth-largest negative 3-day move – a positive mass liquidity. Just like Bitcoin, it was the worst in February in a decade. Meanwhile, in Altcoin Land, the top 200 crypto index vomited again. The chart shows that the 365-day new low hit 47%, a sign of yielding. Bull Cycle. By May, this phase will enable Bitcoin to have new Bitcoin and top 200 total stocks. ”
At press time, BTC traded at $88,404.
Featured Images created with dall.e, Charts for TradingView.com
