The US Dollar Index (DXY) has fallen below the 200-day moving average (MA) for the first time since November last year. This represents an important change in the trajectory of the currency.
Meanwhile, Bit(BTC) is maintaining psychological support above $90,000. It is defending against further declines ahead of the Crypto.com conference on Friday.
US DXY Slips Below 200-day Moving Average
Over the past 3 trading days, the DXY has declined by more than 3%. This movement has slipped below the 200-day MA for the first time in 3 months. Losing the support provided by the moving average in trading generally suggests weakened momentum, which is a bearish signal.
This decline in the DXY has sparked speculation about potential upside momentum for risk assets. Prominent Bit(crypto) analyst Lark Davis weighed in on this development. He says a weakening dollar and expanding global money supply is positive for digital assets.
Davis emphasized that the US government is working to build a strategic Bit(Bitcoin) reserve, which could further strengthen positive sentiment towards Bit(Bitcoin) and the Bit(crypto) market. However, the analyst warned that short-term volatility is still possible, despite the favorable long-term outlook.
"But that doesn't mean things will get worse before they get better. Patience is key here," Davis added.
Historical Precedent, Bullish Bit(Crypto) Thesis
Another prominent analyst, Dan Gambardello, pointed to historical patterns. He noted that similar DXY declines in past cycles have triggered parabolic rallies in the Bit(crypto) market.
"This DXY fractal could be the most important fractal in Bit(crypto)." Gambardello observed.
The analyst also emphasized that the current market fundamentals are much stronger than in the past. If history repeats itself, Bit(Bitcoin) and altcoins could be primed for a substantial rally.
"In the last cycle, this move triggered a parabolic rally. This time, the foundations are 100x stronger," the analyst added.
Meanwhile, the weakness in the US dollar is partially attributed to former President Donald Trump's trade policies. Trader and market analyst Mr. Spread explained that Trump's tariff strategy has been putting downward pressure on the DXY and pressuring the Federal Reserve.
"His 'more rate cuts' demands haven't moved the Fed much. So he's using tariffs as an alternative strategy," the trader suggested.
The analyst further elaborated that tariffs have created economic uncertainty, slowing growth, and potentially leading the Fed to cut interest rates. Lower rates weaken the dollar, making US assets less attractive for investors seeking higher returns.
Meanwhile, technical analysts are monitoring key levels for the DXY. The 105.3 level, previously a support, has now turned into resistance. The next important short-term target is 103.7, and a break below that could pave the way for further declines towards the 99.6 area.
Below 99.6, the DXY could see a steeper decline, potentially accelerating the flow of capital into alternative assets like stocks and Bit(crypto).
Analysts also point to the expanding global M2 money supply as a potential catalyst for a Bit(Bitcoin) rally. As reported by BeInCrypto, analysts suggest the correlation between M2 money supply expansion and Bit(Bitcoin) price could signal a major upward move by the end of March.
This aligns with the historical tendency for risk assets, including Bit(Bitcoin), to benefit when financial system liquidity increases. However, traders should still conduct their own research.
According to BeInCrypto data, BTC is trading at $91,293 at the time of writing, recording a slight 1.62% increase since the start of the Thursday session.
