The digital asset sector is highly dependent on macroeconomic situations. Being King Bitcoin correlated and dependent on the S&P500 index or DXY dollar, it is important to keep an eye on these markets in order not to forge ideas with the cryptocurrency market alone.
For this I suggest you take the latest events at the macro level to adapt them to the cryptocurrency market.
A weakened dollar
As you probably know, the US dollar index has evolved tremendously over the past year, has completely crushed other currencies and is back to revisiting previous highs. The latter is considered a safe asset, so when the stock or cryptocurrency market (risky assets) crashes, people rush towards the dollar. Therefore it is favorable for the risk assets sector to see the DXY index slightly corrected, this indicates that capital is leaving the dollar to feed the equity/crypto sector.
Therefore, after our big bullish rally, we hit a TOP at $114.7 to finally take a little over 8% down. We were supported by the first Fibonacci stop (0.382) and are now looking to reverse the trend (short-term). Both scenarios are possible, therefore it will be necessary to remain vigilant on the following levels:
- $108.5: corresponds to the first upside target of the downtrend and could be prompted to push the price back down. Be careful not to see distribution structures on these levels (M-Top type)
- $105.1: Confusing the 0.382 Fibo of the bullish move with the latest low makes for excellent support. An accumulation structure could establish itself on it to gain strength to clear $108.5, and thus continue its bullish momentum in the medium term.
To draw a parallel with the cryptocurrency market, it would be interesting to see a slight weakening of a DXY, as this could be a signal of the inflow of capital.
Read also Is Shiba Inu Cryptocurrency Dead? Can the price of SHIB (really) suddenly wake up and reach $1 one day?
This drop in the dollar index has not been without repercussions on the US market. In fact, he saw himself make a slight rebound on the 0.5 Fibonacci, to finally get to look for his first upside target. For the S&P500 to continue its long-term underlying trend (bullish), a break above $4040 is imperative. In this case, this last correction could be reversed quite quickly and the market could turn around (in the medium term). However, somewhat like the DXY, the signing of an M-Top at our resistance levels will signal a bearish continuation, aiming for the channel bottom ($3200).
A cryptocurrency market sidelined
Unlike the traditional market, which has recovered capital, the digital asset market is neglected. Indeed, when we look at the cryptocurrency capitalization chart, we do not notice any upside or potential bounce. So under such conditions, it seems difficult to revive the cryptocurrency sphere.
To conclude, I would say that the situation is delicate for risky assets and more particularly cryptocurrencies. We have a dollar that threatens to go higher and any correction is being absorbed by the traditional market. This analysis is in no way investment advice, I encourage you to get DYOR on your side.