Bitcoin: One More Bet On A Continued U.S. Dollar Breakdown

The U.S. Dollar Index Breaks Down

The U.S. dollar broke down last week. The weekly chart below shows the U.S. dollar index (DXY) closed last week at a near 2-year low.

Numerous anti-dollar bets are gaining fast thanks to the U.S. dollar’s breakdown. The cryptocurrency Bitcoin (BTC/USD) is joining the party.

Bitcoin joins the anti-dollar party

The rumblings began on July 21st when Bitcoin surged into its 50-day moving average (DMA). On that same day, the U.S. dollar index sold off and closed just above its March low. BTC/USD broke out the next day and created the first buy signal. I decided to forgo that signal given 1) two earlier false 50DMA breakouts, and 2) in late May I locked in my last trading profits to sit on the sidelines and await a higher bar of proof with a $10K breakout.

The $10K breakout came over the weekend. The 15-minute chart below shows an initial surge that brought in the first wave of momentum chasers. A pullback to the $9850 level became solid support for the next launch through $10,000.

The Trade

I pulled the trigger on the pullback from the $10,300 level. The latest breakout took BTC/USD above the June 1st intraday high and false breakout. The next proof point sits at $10,500 where BTC/USD topped out just ahead of the pandemic-driven collapse in financial markets.

I am back in Bitcoin with the house’s money, so I am content to watch the action from here until the next entry point appears. Unless Bitcoin plunges to offer a new super-discount (say a reversal of the April, 2020 breakout at $7500), I anticipate joining the momentum chasers after a confirmed $10,500 breakout.

I am also keeping an eye on the Google Trend Momentum Check (GTMC) for signs of a blow-off run-up (a time to take profits if it happens). So far, Google searches for “Bitcoin” are sticking close to their recent languid patterns.

Be careful out there!

Full disclosure: long BTC/USD