The US Dollar Index (DXY) has fallen below its 200-day moving average (MA) for the first time since November, marking a significant shift in the currency’s trajectory.
Meanwhile, Bitcoin (BTC) continues to hold above the psychological level of $90,000. It defends against further downside ahead of Friday’s crypto summit.
US DXY Slips Below 200-Day MA
Over the past three trading days, the DXY has dropped by more than 3%. The move saw it slip below the 200-day MA for the first time in over three months. In trading, losing the support offered by the moving average generally suggests weakening momentum and is a bearish signal.
This decline in the DXY has fueled speculation about potential bullish momentum for risk assets. Lark Davis, a renowned crypto analyst, weighed in on the development. He states that the weakening dollar and an expanding global money supply are bullish for digital assets.
Davis highlighted that the US government is working toward establishing a strategic Bitcoin reserve. This could further reinforce positive sentiment for Bitcoin and the crypto market. However, the analyst cautioned that short-term volatility remains a possibility despite the favorable long-term outlook.
“However, it doesn’t mean things can’t get worse before they start getting better. Patience is key here,” Davis added.
Historical Precedents and the Crypto Bull Run Thesis
Dan Gambardello, another well-known analyst, pointed to historical patterns. He pointed to a similar DXY decline during the last cycle, which triggered a parabolic bull run in the crypto market.
“This DXY fractal might be the most important fractal in crypto,” Gambardello observed.
Further, the analyst emphasized that the current market fundamentals are significantly stronger than in the past. If history repeats itself, he said, Bitcoin and altcoins could be poised for a substantial rally.
“Last cycle, this move triggered a parabolic bull run. This time, fundamentals are 100x stronger,” the analyst added.
Meanwhile, the weakening of the US dollar has been partially attributed to President Donald Trump’s trade policies. Mister Spread, a trader and market analyst, explained that Trump’s tariff strategies exert downward pressure on the DXY while forcing the Federal Reserve’s hand.
“His calls for ‘more rate cuts’ didn’t move the Fed much, so he’s using tariffs as an alternative strategy,” the trader suggested.
Further, the analyst detailed how tariffs create economic uncertainty, which could slow growth and lead to the Fed cutting interest rates. Lower interest rates weaken the dollar, making US assets less attractive to investors seeking higher yields.
Meanwhile, technical analysts are also monitoring key levels for the DXY. The 105.3 level, previously a support, has now flipped to resistance. The next critical short-term target is 103.7, and if that level is breached, a further decline toward the 99.6 area could be on the horizon.
Below 99.6, the DXY could see a steeper drop, potentially accelerating capital flows into alternative assets like stocks and cryptocurrencies.
Analysts also point to the growing global M2 money supply as a catalyst for a potential Bitcoin rally. As BeInCrypto reported, analysts say the correlation between M2 money supply expansion and Bitcoin’s price suggests that a major upward movement could occur by late March.
This aligns with the historical trend where increased liquidity in the financial system favors risk assets, including Bitcoin. However, traders must still conduct their own research.
BeInCrypto data shows BTC was trading for $91,293 as of this writing, after a modest 1.62% surge since Thursday’s session opened.
Disclaimer
In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.
