Jaipur (CoinChapter.com) — Elon Musk did it again. All it took for him was the bitcoin hashtag and a heartbreak emoji. To break the course of BTC’s recovery rally. But elsewhere, the US Dollar had a ball, as the US Dollar Currency Index rallied, reinstating investors’ faith in the greenback. Although, it cannot be said that the two assets are moving totally inversely. There is an element of “lagging correlation”.
US DXY Rises As Bitcoin Price Takes A Hit
Investors holding the US Dollar were in for a welcome surprise yesterday. The US Dollar Currency Index (aka DXY/USDX) rallied from the low at 89.8 to 90.6. DXY is a parameter that measures the strength of the US Dollar against a basket of several other fiat currencies. Namely – Euro, Swiss Franc, Japanese Yen, Canadian dollar, British pound, and Swedish Krona.
And not just the DXY. Investment vehicles related to the US Dollar such as the 10-year treasury bonds also rallied yesterday. The run-up resulted in a significant recovery of value post the bottom on May 25, 2021.
But There’s A Catch
While bitcoin price printed a bearish candle rejecting all the gains (thanks to Mr. Musk), US DXY has not stayed behind either. On a close comparison of daily charts for both BTC and DXY, it becomes clear that there is a “lagging correlation” between their movements.
What does this mean? Despite the falling unemployment rates (which is a welcome change for the US economy), continuous fiscal stimulus has brought back fears of skyrocketing inflation. For the uninitiated, fiscal stimulus refers to the pumping of new money within the economy. This leads to excessive money in the system, which shoots up prices and hence inflation rates.
Naturally, the optimistic US jobs data has done nothing to further raise confidence in the US Dollar. Similarly, Elon Musk’s bitcoin trashing tweets have done the same. Investors now feel that the Tesla boss’s influence on the top cryptocurrency is far too much. And not just BTC, Dogecoin holders have also been doled out a world of pain due to the dip.
So diminishing confidence in both the US Dollar and bitcoin has resulted in the former following the latter’s bearish moves.