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Bitcoin price prediction as the US dollar index plummets | CPT PPP Coverage

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Bitcoin price prediction as the US dollar index plummets appeared on coinjournal.net by Crispus Nyaga.

  • Bitcoin price has been in a tight range in the past few weeks.

  • Bitcoin’s fear and greed index has dropped to the fear level of 25.

  • The US dollar index has plummeted to $103.

Bitcoin price has held in a tight range even as the US dollar index (DXY) has plunged to the lowest level since June. BTC/USD was trading at $16,858, where it has been in the past few days. This price is more than 70% below its all-time high of near $70,000.

US dollar index crashes

Bitcoin and the US dollar have had a strong inverse relationship in the past few years. In most cases, Bitcoin rises when the greenback retreats. 

Recently, this inverse correlation has faded as Bitcoin and the US dollar have continued dropping. The US dollar index has plunged from the year-to-date high of over $115. 

It has crashed in the past few months even after the relatively hawkish Federal Reserve. In its December meeting, the Fed decided to hike interest rates by 0.50% after hiking by 0.75% in the previous four meetings. You can read more about the Fed decision here.

The Fed also hinted that it will continue increasing interest rates in the coming months. Recent numbers are supportive of higher rates. For example, data published last week revealed that the economy expanded by 3% in the third quarter after slumping in the previous two straight quarters. 

Additional data revealed that inflation is falling at a relatively slower pace. On Friday, the Fed’s favourite inflation gauge showed that it dropped in November as gasoline prices eased. 

Bitcoin price has also dropped as the fear and greed index has remained under pressure. The closely watched Bitcoin fear gauge remains below 30, meaning that investors are fearful about the state of the market.

In my view, the most accurate fear gauge is outflows. Binance has had outflows worth over $9 billion in the past 30 days. Similarly, the leading crypto banks like Silvergate have had some of their biggest outflows on record.

Bitcoin price prediction

BTC/USD chart by TradingView

So, is it safe to buy Bitcoin? The 4H chart shows that the BTC price has been in a tight range in the past few weeks. It is hovering at the 16,800 level, where it has been this month. Bitcoin’s Relative Strength Index (RSI) has moved close to the neutral point of 50.

Therefore, despite the collapse of the US dollar index, there is a likelihood that it will soon have a bearish breakout. If this happens, the next key support level to watch will be at $15,435, the lowest level in 2022. A breakdown below that level will mean that there are still more sellers in the market.

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