Today as well, the price of Bitcoin (BTC) is declining. During the weekend, it seemed to have stabilized, but most likely the crypto markets made a big mistake yesterday.
However, there are signals indicating a possible rebound in the second half of the month.
The Mistake of Crypto Markets
Yesterday, with traditional exchanges closed for the weekend, the exchange rate on the crypto markets between USDC and EURC showed a slight signal of weakness. In other words, the crypto markets were pricing in a small weakening of the dollar against the euro that was expected to materialize today with the reopening of traditional exchanges.
Instead, today at the reopening of trading on the forex, the exact opposite occurred.
To be honest, in the first three hours, the dollar slightly weakened against the euro, but in the following five hours, it significantly appreciated.
It should be remembered that the euro is the main currency that makes up the basket on which the calculation of the Dollar Index is based, therefore if the dollar appreciates against the euro it also means that most likely DXY is rising.
Moreover, the trend of the BTC price tends to be inversely correlated with that of the Dollar Index, especially in the medium term, and so in the end yesterday the crypto markets made a blunder.
The trend of BTC price
On Saturday, the price of Bitcoin had risen to around $110,000, and it had stabilized there after dropping to $106,000 on Thursday.
Yesterday at one point it even seemed to want to rebound further, after climbing back above $111,000, but it was just a flash in the pan.
The point is that the crypto markets were pricing in a decline of the Dollar Index at the reopening of the exchanges, and therefore a possible rise in the price of BTC.
Instead, although DXY slightly fell in the first minutes of reopening, it later rose to 99.8 points, compared to the 98.7 with which it had closed on Friday.
At that point, the crypto markets realized the mistake and began to sell BTC, bringing the price of Bitcoin back to $107,000.
To tell the truth, subsequently the Dollar Index returned to 98.7 points, but by then the damage to the crypto markets had already been done. However, this at least halted the decline of BTC.
The negative forecasts
The problem is that there are no good forecasts in this regard in the short term.
The trend of the Dollar Index is following a pattern very similar to that of late 2017.
This is such a strong similarity that practically since August it has been following an almost identical trend. If this coincidence were to persist, today one might expect a rise in the Dollar Index even above 100 points during the day. It should be noted that the US stock markets will only reopen when it is afternoon in Europe.
Furthermore, in 2017 after this last rise in early November, until mid-month DXY remained high, and this requires considering the fact that the price of BTC may have to suffer for another couple of weeks or so.
The positive forecasts on the price of BTC
However, the most interesting thing is that starting from the second half of November, the trend could reverse if the correlation of the Dollar Index’s performance with 2017 continues.
In fact, at the time, after about two weeks of stagnation at relatively high levels, a long period of decline began that lasted even until the very early months of 2018.
This allows for some optimism regarding the price of BTC, which could even drop well below $100,000 in the next two weeks, but perhaps only to then start a new bullrun at the end of the year.
The hypothesis circulating is known as the “Christmas rally“, and it would concern a bit all risk-on assets in the financial markets.
It would be in all respects a true bullrun that could begin in the second half of November and continue at least until the end of the year. It is not even to be excluded that it could extend even further, until the early months of 2026.
For now, it is still just a hypothesis, so much so that by strict logic it should not even be properly defined as a “forecast”, but given the correlation of the Dollar Index with 2017, at least it rests on foundations that could prove to be solid.
The yen
At this moment, it actually seems to be the Japanese yen that is primarily responsible for the rise of the Dollar Index.
In fact, the new Japanese government, which took office just a few weeks ago, wants to devalue the yen against the dollar to boost its exports in order to counteract their reduction caused by the tariffs of Trump.
The problem, however, is that it is not in the USA’s interest for the dollar to strengthen too much, because by doing so it would further favor its imports while simultaneously disadvantaging exports.
One of the main issues Trump is trying to address is the excessive imbalance of the US trade balance with foreign countries due to an overly strong dollar, given that, for example, the Dollar Index has been generally strengthening over the long term for 18 years.
If the yen, as suspected, were to depreciate too much (and too quickly) against the dollar, the USA might at some point want to intervene and devalue the greenback in turn.