On December 3, 2022, the USD index (DXY) manages to bounce back at a crucial moment posing serious questions in investors’ minds can Bitcoin (BTC) surpass the resistance level of $17000?
DXY is the dollar index that measures how effectively the dollar has retained its market value against top-tier foreign currencies. On Dec 2, 2022, the DXY index dropped to 104.40, a five-month low.
However, USD’s market weight against the top currencies increased by 19.6% in September.
As a result, investors were looking for protection against increased energy costs and high inflation.
However, the first week of December has seen a remarkable recovery of USD against the top foreign currencies as DXY surged to a 114.60 peak, a high level of rise over the past 20 years.
Despite the gain of DXY its inverse correlation with Bitcoin remains wavered. Bitcoin still stands its ground strongly at $16,942, but the gain in DXY prevents Bitcoin to cross the $17000 resistance level.
It is interesting to experience that when Bitcoin saw a $230 flash drop to $16,790, the intraday DXY peaked at 105.50 from its 104.40 low.
A Bitcoin supporter named Aldo the Apache said that the current rise in the DXY is the result of a bullish trend that comes just in the nick of time when S&P500 received the support at a critical level.
What Impact Does DXY Regain on Bitcoin?
Given the news that the USD has the upper hand against all the other fiat currencies and stock markets in the U.S. had once more crashed, had negatively dented the ability of Bitcoin to go above the $17K resistance level.
In a recent analysis of Bitcoin, Cointelegraph’s analysts said that an intense bearish trend is waiting for Bitcoin. This bearish call has posed serious doubts in the minds of Bitcoin miners, as they are forced to think that another wave of capitulation is waiting.
As Bitcoin is struggling to retain its price and failed to cross the $17k mark. There is so much selling pressure on those who hold Bitcoin and those who are willing to earn a long-term profit are rushing to buy Bitcoin.
As a result, a high hash rate and a further rise in energy costs will significantly cut down the profits of miners.
Glassnode’s miner that measures the Bitcoin withdrawals from mining wallets has already reached a six-month high.
As the result of current economic turmoil in both fiat currency markets and digital currency markets, investors have rapidly invested in crypto derivatives trading.
Derivatives allow investors to borrow cryptocurrencies to leverage their holdings. For example, an investor can raise its stablecoins quantity to buy Bitcoin. Derivatives are beneficial for traders for now.
It is important to mention that the rise in Bitcoin prices on November 30 when Bitcoin surpassed the $17k mark was not only to win the investors’ trust because that gain was short-lived and on Dec 1, 2022 Bitcoin price declined.
Moreover, many analysts are actively arguing that derivatives are the best trading option until the market achieves much-needed stability.
Market experts do believe that the current situation has made it difficult for investors to directly invest in cryptocurrency buying and selling.
Investors are clearly afraid of putting money into crypto wallets. Moreover, in order to earn sustained yields, investors are borrowing Stablecoins to get a stake in Bitcoin.
On the other hand, pro traders are convinced that Bitcoin will not be able to reach the $18,000 bullish resistance level anytime soon. This is because Bitcoin is heavily interlinked with Fiat currencies.
With the current monetary changes that might occur in December things can go even worse. Interest rate hikes, high inflation, and unemployment, all these critical issues are yet to be resolved.
Under the current circumstances, investors are not in the mental state to trust that Bitcoin prices can increase anytime soon.