Opinion: The ‘golden cross’ in the dollar index won’t threaten Bitcoin

Concerns about the impact of a stronger U.S. dollar on digital gold may be overstated, especially over the long term. The two assets are not closely correlated, Cointelegraph notes.

On September 22, the U.S. dollar index DXY, amid expectations of further tightening of monetary policy by the the Fed, reached a 10-month high.

On the chart, a so-called “golden cross” formed — the 50-day and 200-day SMA crossing from bottom to top. For technical analysis enthusiasts this signals a forthcoming bullish trend.

The publication noted that the link between waning demand for Bitcoin in a stronger dollar environment may weaken as doubts grow about the Fed’s ability to curb inflation without harming the economy.

Analysts explained that on one hand risk appetite is waning, while on the other—money supply is increasing, which is positive for digital gold.

As the government continues to raise the debt ceiling, investors face a “dilution” of capital purchasing power. This makes nominal yields less meaningful due to the expanding money supply.

Such a scenario helps explain why scarce assets like Bitcoin can show resilience even during an economic downturn.

If the S&P 500 continues its downward trajectory, investors may curtail risk appetite, including reducing positions in the first cryptocurrency, experts warned.

Analysts stressed that the same inflation- and recession-driven pressure is likely to push the money supply higher either through additional Treasury issuances or Fed purchases.

In either case, an abundance of liquidity in the financial markets would be supportive of digital gold. This would occur as investors seek safe-havens in alternative assets to protect against stagflation — a condition characterized by stagnating growth amid high inflation.

As noted, against the backdrop of the resilience of the first cryptocurrency, the correlation of Bitcoin with the U.S. dollar dropped to zero , while with leading stock indices it has become only mildly negative.

Earlier, BitMEX co-founder Arthur Hayes allowed for a possible brief dip of digital gold below $20,000 with a following new bullish impulse. However, in September he pointed to positive prospects for the first cryptocurrency despite the Fed’s policy.