Less than 100 DXY (Dollar Index) has historically matched BTC (Bitcoin) Bull Runs, gaining more than 500% of the last two instances. As trade tensions are now increasing and US treasures are facing selling, some analysts believe that China may be actively trying to weaken the US dollar. As a result, when the pressure on the dollar is added, it is more likely to serve as a catalyst for another major bitcoin rally.
Are China trying to weaken the US dollar?
According to the Reuters Report on April 9, China’s central bank ordered state loan agencies to “decrease in dollars” as the comfort faced a significant downward pressure. A large bank has been instructed to strengthen checks when running a dollar purchase order for customers, and signaled a signal saying, “Efforts to suppress speculative transactions.”
Some analysts have recently speculated whether China is trying to weaken the dollar by responding to an increase in US import tariffs. But Jim Bianco, president of Bianco Research, has a different view.
source: X/jim bianco
Bianco is questioned that China is selling the US Treasury with the intention of harming the US economy. He pointed out that DXY was stable around level 102. China can sell bonds without converting the proceeds to other currencies, but this approach seems unprecedented by not making the dollar unstable. According to Bianko, China is unlikely to be an important seller of the Treasury.
US dollar index (DXY). Source: TradingView / COINTELEGRAPH
The DXY index has been close to level 104 on March 9 and has been continuously maintained within the 100-110 range since November 2022. Therefore, the current level reflects a wide range of distrust of the US dollar or claims to have no basis for imminent collapse. Indeed, stock market performance does not accurately measure the risk of investors in the economy.
DXY of less than 100 usually leads to bitcoin bull runs.
The last drop of the DXY index fell to less than 100, which was a period that matched the Bitcoin bull run in June 2020. For nine months, Bitcoin has soared from $ 9,450 to $ 57,490. Similarly, when DXY dropped to less than 100 in mid -April 2017, Bitcoin’s price surged from $ 1,200 to $ 17,610 within eight months. Regardless of the coincidence, the 100th level matched a significant increase in Bitcoin prices.
The weakened DXY indicates that the US dollar has lost its value for major currency baskets such as EURO, SWISS Franc, British Pound and Japanese Yen. This decline affects US -based companies by reducing imports from foreign imports, which lowers tax donations to the US government. This problem is especially important given that the United States operates an annual deficit that exceeds $ 1 trillion.
Similarly, US imports will be more expensive in the dollar when the currency is weakened even if the price of individuals and corporate income does not change due to foreign currency. Despite being the world’s largest economy, the United States imports $ 160 billion in oil, $ 215 billion, passenger cars, $ 255 billion, computers, smartphones, data servers and similar products.
relevant: China’s tariff response can mean more capital flight to encryption: Hayes
The weak of the US dollar has a double negative impact on the economy. It tends to slow down as income is more expensive, and at the same time, the US -based company reduces tax income from international income. For example, more than 49% of the sales of major companies such as Microsoft, Apple, Tesla, Visa and Meta come from outside the United States. Similarly, companies such as Google and NVIDIA estimate more than 35% of revenue.
The price of Bitcoin can be recovered at $ 82,000, regardless of the movement of the DXY index. This can occur when investors are concerned about the potential liquidity injection of the US Federal Reserve Bank. However, if the DXY index drops to less than 100, investors can be more powerful to switch to alternative hedge tools such as Bitcoin.
This article is for general information purposes and should not be considered legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.