In this video, The Art of Crypto explains why the US Dollar Index (DXY) is a crucial leading indicator for equity markets and risk‑on assets such as Bitcoin. He notes that every major Bitcoin bull market since its inception has coincided with a sustained decline in the DXY, citing the 2016‑2018 crypto rally and the post‑March‑2020 surge as examples. Since September 2021 the DXY has been on a strong uptrend, marking the peak of the recent bull market. The analyst draws a weekly Fibonacci retracement from the latest high to low, showing the DXY currently sits at a deep 0.786 retrace and has just broken a key weekly resistance level that hasn’t been breached in 20 years. He also plots a monthly Fibonacci from the 1985 high to the 2008 low, highlighting the 0.5 level as a critical support zone where market makers may start converting USD into assets, ending the recessionary phase. He argues that, depending on Federal Reserve interest‑rate policy, the DXY is likely to top within the next three months to a year; a peak would be bullish for Bitcoin and other risk assets. The video concludes with a cautious optimism that a DXY decline will enable a new crypto rally.
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So I had a follower on Twitter ask me to do an analysis on the DXY, and now that I think of it, yeah, it's actually really important for me to do an analysis on DXY because it's really telling for what equity markets and risk-on assets like Bitcoin is going to do. The thing is, DXY is like a really telling indicator of when bull markets are going to happen, or just simply like Bitcoin pumps. For example, if you see on every single occasion since Well, basically a decade since Bitcoin has been in existence, every single time you see the DXY going down is when bull markets begin. For example, at the end of 2016 till about the beginning of 2018, the DXY has been on a strong downtrend. That is where you got the 2017 bull market for crypto. Same thing goes for 2020, March, after you had, well, you know, you know what, the DXY started going down and that's when every single market saw its biggest valuation yet. So currently, DXY has been going up rather aggressively, in fact, super aggressively over over the period of, well, since the end of 2021 basically, which is September 2021, it started going in an uptrend. And that's where you started seeing the peak of the bull market. If you can see right here on DXY on May, that is the peak of the bull market right there. So hopefully that should give you an answer of why that matters. Now let's actually do that analysis here. So here's the, here's the only couple of levels that you need to know. First, DXY is in some pretty major resistance at the moment. In terms of the weekly chart, because if I draw a fib from this weekly high to this weekly low, you can see that we are at the very, very deep retrace at the 0.786. Not only that, but we have just recently took out this key level. So the DXY is going to be almost done, like probably by the end, like by next year, by the end of this year, you will probably, like DXY will probably top out. And that's when the DXY, by the way, the DXY, for those of you who don't know, is the US Dollar Currency Index. It basically dictates the strength of the USD. So Bitcoin is compared against USD, right? Bitcoin/USD. So you can imagine that if USD is going up, Bitcoin would go down, right? It's a pretty simple way to look at it, but well, it works. So I'm expecting DXY to peak somewhere in the next 3 months because firstly, you are already at a very, very important resistance after taking out a key weekly level that you have not taken out for— look at the date, for 20 years, right? It has been 20 years since the USD has been this strong in terms of the DXY. So these are pretty scary times to be in at the moment. And then secondly, you're gonna wanna draw your attention to this level here. So I'm gonna go onto the monthly chart and I'm gonna show you guys if I draw a Fib from this high, right? This high back from 1985 to the low from the 2008 financial crisis, you can see that this is the 0.5 Fib, which means this is the mid-range. Now, it is no coincidence that the algorithms and the market makers form this high over here at the 0.5, right? It is no coincidence. These market makers use Fibs to reprice the markets, and well, this is how it works. So this is going to be really, really, really, really, really strong support— like, sorry, a really key level that if you come into here, you can just start converting all your USD into assets. That's going to be like the end of the quote-unquote recession. So once that happens, well, that's That's the best sign. But are we gonna get there soon? In my opinion, probably not. Like the amount of time it'll take to go like 7 points on DXY, I just wanna put this into perspective. For DXY to go like, let's say from 100 points to 109, it took 5 months. And this is during the time when the Fed has been increasing like the interest rates like crazy, like crazy. So to say that it's gonna go to 117 in the period of the next 3 months, I don't think that's very likely. But it will happen soon. It'll happen probably next year. It depends on how the Fed are approaching the interest rate stuff. But if they don't taper off on the interest rate, right, the interest rate hikes, yeah, you know, you're definitely gonna get there pretty quick. But if they start tapering off, then I'm expecting the next 3 months to find some kind of top on DXY. And that's when Bitcoin and friends finally start to, you know, have a little bit of fun in terms of the bullish direction. Hope this was helpful.
