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A return of capital to the cryptocurrency market?

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The digital asset sector is highly dependent on the macroeconomic situation. Since the Bitcoin king is correlated and dependent on the S&P500 or the DXY dollar index, it is important to keep an eye on these markets so as not to forge your ideas solely on the cryptocurrency market.

To this end, I propose to take the latest developments at the macro level to adapt them to the cryptocurrency market.

The weakening of the dollar

DXY Index on 1W (Tradingview)

As you may already know, the US dollar index has performed tremendously in the last year, totally crushed the other currencies and touched old highs again. The dollar is considered a safe-haven asset, so when the stock market or cryptocurrencies (risky assets) crash, people flock to the dollar. Therefore, it is favorable for the risk asset sector to see the DXY index correct slightly, indicating that capital is flowing out of the dollar into the equity/crypto sector.

So, after our big bull rally, we made a TOP at $114.7 only to suffer a drop of just over 8%. We were supported at the first Fibonacci stop (0.382), and are now trying to reverse the trend (short term). Both scenarios are possible, so we will have to keep an eye on the next levels:

  • 108.5: this is the first upside target of the downtrend and could be the reason to reject the price to the downside. Be careful not to see distribution structures at these levels (M-Top type).
  • The $105.1: confused between the 0.382 Fibo of the uptrend and the last low, this is an excellent support. An accumulation structure could be installed on it to gain strength and break $108.5, and thus continue its medium-term upward momentum.
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Drawing a parallel with the cryptocurrency market, it would be interesting to see a slight weakening of the DXY, as it could be a signal for capital inflows.

Read also. Has the crypto Shiba Inu died? Can the price of (real) SHIB suddenly wake up and go to $1 one day?

S&P500 Analysis

S&P500 on 1W (Tradingview)

This decline in the dollar index was not without repercussions on the US market. Indeed, the latter was seen to make a slight bounce at the 0.5 Fibonacci, to finally come looking for its first upside target. For the S&P500 to continue its long-term uptrend, it is imperative that it breaks $4040. In this case, this last correction could be engulfed rather quickly and the market could turn around (in the medium term). However, like the DXY, the signature of an M-Top at our resistance levels will signal a bearish continuation, with the bottom of the channel ($3200) as a target.

A marginalized cryptocurrency market.

TOTAL Crypto 1D (Tradingview)

Unlike the traditional market, which has recovered capital, the digital asset market has been neglected. In fact, when we look at the cryptocurrency capitalization chart, we do not notice any upside, not even a possible rebound. Therefore, in conditions like these, it seems difficult to revive the cryptosphere.

Conclusion

To conclude I will say that the situation is delicate for risk assets and especially cryptocurrencies. We have a dollar that threatens to rise, and any correction is absorbed by the traditional market. This analysis is by no means investment advice, I encourage you to DYOR on your own.

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