A weaker dollar will push Bitcoin above $20,000

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Investors should keep an eye on the tight inverse correlation between the strength of the U.S. dollar and Bitcoin. It seems that a weaker dollar will push Bitcoin above $20,000.
An important debate among investors in cryptocurrencies is the correlation of Bitcoin (BTC) with other markets. A high degree of correlation between the equity markets and Bitcoin has existed, specifically in the last few months. In other periods, gold and Bitcoin appear to correlate.
However, the correlation that should be watched the most is the U.S. dollar since the global economy is built on the strength or weakness of our world reserve currency, the United States dollar.
The sudden impact of the coronavirus increased the demand for U.S. Dollars, surging heavily in March. This spike caused the other markets to tumble as the price of Bitcoin fall by 50% to as low as $3,700.
However, since this big crash, the DXY has been weakening day-by-day. This sudden weakness of the dollar made other “safe haven” assets to rise significantly over the past six months. Bitcoin has increased 185% since the crash of March while Gold rallied 31%.
But despite the general downtrend still intact, the U.S. dollar has faced a relief bounce in early September as a bottom construction was made. A bullish divergence was created to mark the start of the temporary bottom pattern, after which the 92.75 level was reclaimed as support for next continuation upward.
This relief rally reached 94.60 points and made other assets to drop substantially. Hence, more weakness in the commodity and crypto markets should be expected if the DXY continues toward 96 points.
The previous cycle highs were hit in 2014 and 2017 for BTC, through which credible data can be derived from the correlation between them.
Throughout 2017, the U.S.D showed notable weakness across the boards, as the EUR/USD pair rallied from 1.03 to 1.25 too. During this uncertainty and instability of the U.S.D, Bitcoin had its peak rally from $1,000 to $20,000.
Bitcoin’s peak high is surrounded by the cycle low of the DXY index.
Since then, the DXY index has been showing some strength. Through that, the Bitcoin bear market was fueled until the last month.
A substantial weakness of the DXY index is making the price of Bitcoin and Gold to continue rallying. It seems like history is repeating itself.
What can be understood is the strength of gold since the dot com bubble popped in 2000. During the first stages of a potential fall is the liquidation phase when all markets drop as gold also corrected 30% in 2000. This is the hunt for liquidity to cover losses on the equity markets similar to what has been witnessed in March 2020.
Since the USD showed weakness in 2000, gold has been showing great strength as a safe haven, which would have surged your portfolio by 600%.
In the same time period, the EUR/USD pair rallied from 0.85 to 1.60 in 2008. The momentum then flipped as investors flew to the USD as a hedge during the credit crisis.
But recently, with negative interest rates, increased debt levels, and deflation, Bitcoin is also doing really well.
Of course, a potential crash by 25-35% could take place in the first stage of the crisis just like in March. But Bitcoin and gold would benefit notably afterward as safe havens against a weakening dollar, which is exactly what happened in December 2017 as BTC hit its all-time high of nearly $20,000.
The simple reasoning for this is that confidence in governments will also fall during times of economic uncertainty, like the corona pandemic or systematic risk. Given this uncertainty and exponentially growing debt, the U.S. central bank has one option: devalue the currency, which means further weakness for the USD.
So the prophecy of six-figure prices can become a reality if the dollar’s weakness continues into 20201.

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