The strength of the US Dollar (DXY) has increased significantly in December as the US stock market and Crypto market have experienced a sharp decline. The rise of the greenback is causing concern for risk-taking investors in the late 2024 to early 2025 period.
Here are the summaries and observations from BeInCrypto on the experts' opinions on this move.
USD Index (DXY) surpasses 108 points, setting a new two-year high
Since September, when the crypto community was preoccupied with concerns about the US election results and the positive impact of the new administration on the Crypto market, the correlation between DXY and BTC has been overshadowed. However, in the last week of December, this inverse correlation is showing signs of reappearing.
Weekly chart of USD Index (DXY) movements. Source: TradingView.The evidence is that when DXY surpassed 108 points and set a new two-year high, the crypto market capitalization evaporated $500 Billion, and Bitcoin (BTC) fell 10% with the largest weekly red candle since September. Additionally, the US stock market (S&P500) also recorded its biggest single-day drop since August.
Naeem Aslam - Founder of Zaye Capital predicts a negative outlook for assets like crypto or stocks.
"The US Dollar Index (DXY) has surged to its highest level in 2 years, reflecting strong demand for the dollar amid expectations of prolonged high interest rates and the Federal Reserve's cautious stance. This could put pressure on other global currencies and USD-denominated commodities." - Naeem Aslam commented.
According to this assessment, if DXY continues to rise in December or early 2025, the crypto and stock markets will likely continue to decline. However, investor Justin Bennett believes that the rise in DXY will provide new buying opportunities at better prices for Crypto investors.
Analysis and forecast of DXY by the end of 2024. Source: Justin Bennett"Do you want to know where the bottom of the crypto market is likely to be? Just follow the money, or the DXY index in global liquidity. My target for the US Dollar index is 110.00 points from the recovery from 102.60 points. And I bet that area will mark the bottom of crypto in early 2025." - Investor Justin Bennett predicted.
Thus, according to Justin Bennett's analysis, crypto capitalization will continue to decline at least until the end of December.
Arguments predicting DXY will decline
Alongside the negative predictions about the inverse correlation between DXY and BTC, there are also other perspectives suggesting that DXY is about to decline again. From a weekly technical perspective, DXY has formed a bearish RSI divergence signal. This is the most widely shared signal to support the scenario of DXY declining (and crypto recovering).
Additionally, investor Tomas presents a more insightful perspective by comparing the DXY movements with 2016, which was the year Donald Trump was first elected as US President.
Comparison of DXY movements between 2016 and 2024. Source: TomasOnMarketsTomas believes that the US Dollar (DXY) has risen sharply after Jerome Powell expressed a somewhat "hawkish" stance in the recent FOMC press conference. The rise of DXY to the 108/109/110 point region could pose a serious obstacle for the US stock market and Bitcoin. However, there is still a positive hope based on the above-mentioned past pattern.
"The positive aspect of this fractal model, from the perspective of optimistic investors, is that DXY has declined almost continuously throughout 2017, the first year of Trump's tenure (expected to be similar in 2025)." - Tomas commented.
In reality, Bitcoin also has its own momentum to counteract macroeconomic influences. This includes Trump's strategic reserve plan and the relentless accumulation by nations and large companies.
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