{"id":493948,"date":"2022-09-16T23:15:00","date_gmt":"2022-09-16T20:15:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/data-challenges-the-dxy-correlation-to-bitcoin-rallies-and-corrections-thesis\/"},"modified":"2022-09-16T23:15:00","modified_gmt":"2022-09-16T20:15:00","slug":"data-challenges-the-dxy-correlation-to-bitcoin-rallies-and-corrections-thesis","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/data-challenges-the-dxy-correlation-to-bitcoin-rallies-and-corrections-thesis\/","title":{"rendered":"# Data challenges the DXY correlation to Bitcoin rallies and corrections \u2018thesis\u2019"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a2cbbe39bdac\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a2cbbe39bdac\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/data-challenges-the-dxy-correlation-to-bitcoin-rallies-and-corrections-thesis\/#%E2%80%9D_Data_challenges_the_DXY_correlation_to_Bitcoin_rallies_and_corrections_%E2%80%98thesis_%E2%80%9C\" >&#8221; Data challenges the DXY correlation to Bitcoin rallies and corrections \u2018thesis\u2019 &#8220;<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/data-challenges-the-dxy-correlation-to-bitcoin-rallies-and-corrections-thesis\/#Correlation_changes_over_time_despite_the_general_inverse_trend\" >Correlation changes over time, despite the general inverse trend<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/data-challenges-the-dxy-correlation-to-bitcoin-rallies-and-corrections-thesis\/#The_dollar_strengthened_after_the_FOMC_minutes\" >The dollar strengthened after the FOMC minutes<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/data-challenges-the-dxy-correlation-to-bitcoin-rallies-and-corrections-thesis\/#Correlation_should_not_be_used_to_predict_short-term_moves\" >Correlation should not be used to predict short-term moves<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_Data_challenges_the_DXY_correlation_to_Bitcoin_rallies_and_corrections_%E2%80%98thesis_%E2%80%9C\"><\/span>&#8221; Data challenges the DXY correlation to Bitcoin rallies and corrections \u2018thesis\u2019 &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<div class=\"post-content\" data-v-6ebd806f>Presently, there seems to be a <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a> assumption that when the U.S. dollar value increases against other global major currencies, as measured by the DXY index, the impact on Bitcoin (BTC) is negative.<\/p>\n<p>Traders and influencers have been issuing alerts about this inverse correlation, and how the eventual reversal of the movement would likely push Bitcoin price higher.<\/p>\n<p>Analyst @CryptoBullGems recently reviewed how the DXY index looks overbought after its relative strength index (RSI) passed 78 and could be the start of a retrace for the dollar index.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">This is literally the only thing you need to look at:<\/p>\n<p>The <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/search?q=%24DXY&amp;src=ctag&amp;ref_src=twsrc%5Etfw\">$DXY<\/a> is crazy overbought right now and due a correction. <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/search?q=%24BTC&amp;src=ctag&amp;ref_src=twsrc%5Etfw\">$BTC<\/a> is the most oversold it ever has been on the monthly timeframe. <\/p>\n<p>BITCOIN AND THE DOLLAR SHARE AN INVERSE CORRELATION. <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/search?q=%24BTC&amp;src=ctag&amp;ref_src=twsrc%5Etfw\">$BTC<\/a> will rise and fiat will fall. <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/t.co\/MpZniivpj0\">pic.twitter.com\/MpZniivpj0<\/a><\/p>\n<p>\u2014 The London Crypto (@SerLondonCrypto) <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/SerLondonCrypto\/status\/1567220997853437958?ref_src=twsrc%5Etfw\">September 6, 2022<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><br \/>\nMoreover, technical analyst @1coin2sydes presents a bearish double top formation on the DXY chart, while simultaneously Bitcoin forms a double bottom, a bullish indicator.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">Very beautiful Inverse Correlation between the Dollar Index DXY and Bitcoin BTC!<\/p>\n<p>As <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/hashtag\/DXY?src=hash&amp;ref_src=twsrc%5Etfw\">#DXY<\/a> forms a Double top (which maybe a reversal of its Trend) &#8211; Heading Down!<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/hashtag\/BTC?src=hash&amp;ref_src=twsrc%5Etfw\">#BTC<\/a> forms a Double Bottom (which may serve also as a trend reversal) &#8211; Heading UP!<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/hashtag\/2sydes?src=hash&amp;ref_src=twsrc%5Etfw\">#2sydes<\/a> <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/t.co\/A4eZSfJG82\">pic.twitter.com\/A4eZSfJG82<\/a><\/p>\n<p>\u2014 2sydes.eth (,) (@1coin2sydes) <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/1coin2sydes\/status\/1569403872036241411?ref_src=twsrc%5Etfw\">September 12, 2022<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Correlation_changes_over_time_despite_the_general_inverse_trend\"><\/span>Correlation changes over time, despite the general inverse trend<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The periods of inverse movements between Bitcoin and the DXY index have never exceeded 36 days. The correlation metric ranges from a negative 1, meaning select markets move in opposite directions, to a positive 1, which reflects a perfect and symmetrical movement. A disparity or a lack of relationship between the two assets would be represented by 0.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-09\/c41258e1-ff94-4777-ae27-54d3d7297948.png\"><figcaption style=\"text-align: center;\"><em>Dollar Index DXY 20-day correlation versus Bitcoin. Source: TradingView<\/em><\/figcaption><\/figure>\n<p>The metric has been below negative 0.6 since Aug. 19, indicating that both DXY and Bitcoin have generally followed an inverse trend. In fact, the longest-ever period of inverse correlation has been April 14 to May 20.<\/p>\n<p>Saying that Bitcoin holds an inverse correlation to the DXY index would be statistically incoherent since it had a negative 0.6 or lower in less than 30% of the days since 2021.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_dollar_strengthened_after_the_FOMC_minutes\"><\/span>The dollar strengthened after the FOMC minutes<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>On Aug. 17, officials at the United States Federal Reserve indicated that additional interest rate hikes would be needed until inflation eased substantially, according to the minutes from the July 27 meeting.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-09\/55dddd62-00ea-4194-be3a-d4b725b77389.png\"><figcaption style=\"text-align: center;\"><em>Dollar Index DXY (orange, right) vs. Bitcoin (blue). Source: TradingView<\/em><\/figcaption><\/figure>\n<p>The report caused the U.S. dollar to <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>reciate versus major global currencies, as the market gave the Fed a vote of confidence. Meanwhile, Bitcoin dropped 11% in two days to $20,800, reinforcing the inverse correlation thesis.<\/p>\n<p>Still, a correlation does not imply causation, meaning it is impossible to conclude that the DXY\u2019s positive performance negatively impacted the Bitcoin price after the minutes from the Federal Reserve meeting were released.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Correlation_should_not_be_used_to_predict_short-term_moves\"><\/span>Correlation should not be used to predict short-term moves<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Even though pundits and influencers often use 20-day correlation data to explain daily price movements, one should analyze a more extended timeframe to understand the potential impacts of the DXY index on Bitcoin price.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-09\/ab196fb7-64ff-48bc-9e89-4b37feca7cb8.png\"><figcaption style=\"text-align: center;\"><em>Dollar Index DXY (orange, right) vs. Bitcoin (blue), 2021. Source: TradingView<\/em><\/figcaption><\/figure>\n<p>For instance, 2021 presented some positive correlation between the DXY dollar index and Bitcoin. Maybe some of the movements were anticipated by either side, but no extended periods of inverse correlation were present.<\/p>\n<p>More importantly, events solely relevant to the cryptocurrency might have distorted the metric, such as the first U.S. Bitcoin exchange-traded fund launch on Oct. 19, 2021. Other examples include Tesla announcing a $1.5 billion Bitcoin investment on Feb. 8, 2021.<\/p>\n<p>Moreover, analysts point to the Chinese crackdown on mining in May 2021 as the culprit for the market downturn below $40,000. Those events could not have been anticipated by the DXY dollar index, so any ongoing correlation might have had little impact during those periods.<\/p>\n<p>Consequently, those waiting for a turnaround on the DXY index before placing bets on a Bitcoin rally have no statistical backing. Whenever positive (or negative) developments specific to the cryptocurrency industry take place, the historical correlation loses relevance.<\/p>\n<p><em>The views and opinions expressed here are solely those of the <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/noshitcoins\"><em>author<\/em><\/a><em> and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.<\/em><\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/p>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/data-challenges-the-dxy-correlation-to-bitcoin-rallies-and-corrections-thesis\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; Data challenges the DXY correlation to Bitcoin rallies and corrections \u2018thesis\u2019 &#8220; Presently, there seems to be a general assumption that when the U.S. dollar value increases against other global major currencies, as measured by the DXY index, the impact on Bitcoin (BTC) is negative. Traders and influencers have been issuing alerts about this&#8230;<\/p>\n","protected":false},"author":1,"featured_media":493949,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDkvZjYyZjc4MDMtZDc5ZS00NDQyLTkzODQtYWE0YmFiNjQ4NzIwLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74862,74937,76153,75849,4973,70550,73785],"class_list":["post-493948","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-bitcoin","tag-bitcoin-price","tag-dollar","tag-etf","tag-china","tag-federal-reserve","tag-markets"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/493948","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=493948"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/493948\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/493949"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=493948"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=493948"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=493948"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}