The Headwind for Crypto

Louis Sykes
January 5, 2023

We've said it time and time again.

It's all about the US dollar!

When did the NYSE new highs list peak? When the dollar bottomed...

When did equities bottom? When the dollar rolled over...

It's not rocket science.

I don't care why it's the case because the correlations are so evident. It's a fundamental reality in this tape: A weak dollar is positive for stocks and crypto, while a strong dollar pressures those assets.

Now, consider: What have been the defensive assets in this market?

The Japanese yen? Nope.

Gold? Not until recently.

Bonds? Hell no.

Whenever shit's hit the fan, that money has flowed into the US dollar.

It ain't rocket science, folks.

This is especially important with the US Dollar Index $DXY resting on this shelf of support -- it looks primed for a counter-trend move from this recent sell-off.

There's plenty of price memory here, making it a logical place for the DXY to bounce:

What do you think cryptocurrencies and stocks are doing if the dollar moves higher in 2023?

Ripping or succumbing?

I'll bet it's the latter.

The two have literally been trading in opposite directions for the last year:

If you're bullish crypto, you're probably making the case that the dollar slices right through this support level and continues its sharp decline.

I'd argue that's the lower-probability outcome. But we've sure seen stranger things in financial markets.

So, what'll it be?

Is the dollar about to pump?

Or will risk-on prevail?

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Thanks for reading, and please let us know if you have any questions!

Allstarcharts Team

 

 

 

 

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