The Dollar Death Cross: Why It’s Bullish for Bitcoin
The Dollar Death Cross has captivated the attention of both economists and investors to form a consensus that Bitcoin is likely to benefit long term from the situation. Since the formation of the Dollar Death Cross in March 2020, Bitcoin has seen plenty of positive growth and more investors are witnessing the potential of Bitcoin as an investment.
What is the Dollar Death Cross?
The Dollar Death Cross is an event in which the 50-day moving average of the U.S. dollar index falls below the 200-day moving average of the same index. This event occurs when previous bullish sentiment in the greenback turns bearish. The U.S. Dollar Index is a measure of the value of the U.S. dollar relative to a basket of foreign currencies.
What Was the Effect of the Dollar Death Cross?
The Dollar Death Cross signaled significant volatility in the currency markets due to the massive amount of investment capital that was leaving the U.S. dollar and going into other safe-haven currencies, such as the Yen, Swiss Franc, and gold. The combination of overall concerns about the economic outlook in light of COVID-19 and the Death Cross, weighed heavily on investor confidence in the U.S. dollar.
What are the Reasons Why The Dollar Death Cross Is Bullish for Bitcoin?
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Increased Interest From Institutional Investors:
The Dollar Death Cross propelled a lot of institutional attention towards cryptocurrencies and particularly Bitcoin. This is due to the fact that institutional investors were looking for an alternative asset class to Hedging against potential inflation following the massive devaluation of the U.S. dollar that was expected to come as a result of the COVID-19 pandemic. -
Growing Popularity of Bitcoin as a Digital Store of Value:
The Dollar Death Cross also led to an increase in the popularity of Bitcoin as an investment as investors and traders were looking to store their wealth in a more secure digital asset given the instability of the U.S. dollar. -
Lower Correlation to Traditional Financial Markets:
The rising popularity of Bitcoin can also be traced to its low correlation with traditional financial markets. As investors were becoming weary of the volatility of traditional assets, many switched to cryptocurrencies or gold due to their lower correlation with traditional markets and Bitcoin’s low volatility. -
Exposure to the Digital Economy:
The Dollar Death Cross also exposed many investors to the digital economy and the advantages it can provide. This is because a lot of people who had never really heard of or considered investing in Bitcoin are now doing so, due to the potential returns it can provide in the long term. -
Geopolitical Safe-Haven:
The Dollar Death Cross accelerated the growth of Bitcoin’s position as a geopolitical safe-haven. This is because the U.S. dollar is the dominant reserve currency and its movements affect other countries’ currencies. As such, many investors sought out Bitcoin as a hedge against a potential devaluation of the U.S. dollar, which would lead to major inflation in other countries.
How Can Investors Benefit From Bitcoin Following The Dollar Death Cross?
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Long-term Investment:
Investors looking to invest in Bitcoin as a result of the Dollar Death Cross should focus on a long-term investment strategy. This is because Bitcoin is a long-term investment opportunity and has seen tremendous growth since its inception. -
Hedging:
Investors looking to benefit from the Dollar Death Cross should also consider hedging against currency volatility and seeking out a safe-haven asset, such as Bitcoin. This is because Bitcoin is a relatively stable asset and has low correlation to traditional markets, making it a safe option for investors. -
Diversifying Your Portfolio:
Due to the overall volatility of traditional markets, investors should also consider diversifying their portfolios by investing in Bitcoin as a hedge against inflation and currency devaluation. This is because Bitcoin is a more secure asset and provides investors with the opportunity to protect their wealth over the long term.
The Dollar Death Cross has provided investors with a great opportunity to invest in Bitcoin and benefit from its potential long-term growth. Bitcoin is well positioned to benefit from the drop in the U.S. dollar due to its low correlation with traditional markets, its abilities to act as a geopolitical safe-haven, and its potential as a digital store of value. Thus, investors should consider investing in Bitcoin if they are looking to protect their wealth from inflation and currency devaluation in the long term.
