Market Update - August 17, 2023

I’m still on vacation so no video this time, just words and pictures. Topics for this week:

• Another similarity with 2016—the US dollar

• What they say and what they mean

• Metrics, charts, and directions

• What about the trade from February?

Also, make sure you caught my most recent update.

Another similarity with 2016—the US dollar

For months, we’ve seen many similarities with early 2016. See my most recent update for links to all of these.

Now, we have another: Bitcoin’s movements relative to the US dollar.

It’s a little premature to call this out, but if history is our guide, by the time we know whether it’s valid shift, the opportunity to do anything about it will have passed. So I’ll point it out now.

Look at DXY, an index that compares USD against the currencies of the US’s biggest trading partners. It shifted from downtrend to uptrend in April 2016 and may have also done this recently:

Same with the broad dollar index, which compares USD to a bunch of currencies.

What did Bitcoin’s price do when this shift happened in 2016?

Flat for a while (big ups and downs within a horizontal range), then zoom.

Add this to the metrics, price action, trading indicators, on-chain data, macro confluences, investor behaviors, central bank actions, and other observations I’ve shared over the past months, and it’s one more coincidence with the circumstances of early 2016.

It’ll be a coincidence if Bitcoin’s price—and the larger market—zoom seemingly out of nowhere in September, October, or November.

If that happens, it will match the pace of the market in 2016. Bonus points if a major protocol fails and an exchange collapses, as happened in 2016.

What they say and what they mean

Mark, that’s wrong, YouTube says Bitcoin always goes in the opposite direction as the dollar. When the dollar’s strong, Bitcoin’s price goes down. When the dollar’s weak, Bitcoin’s price goes up!

Pull up any chart and you’ll see that’s not true. Sometimes it works out that way, sometimes it doesn’t. Take a look:

When people talk about a strong USD pushing Bitcoin down, they’re just trying to say “generally, Bitcoin’s price doesn’t spend much time going up when the US dollar’s price is also going up.”

A strong dollar is a bad thing for anybody trading Bitcoin (or any asset) for dollars. It’s a good thing for anybody trading dollars for Bitcoin (or any asset).

But markets are more complex than a simple deduction like that. Correlations come and go. Prices can buck larger trends for months, sometimes longer.

Crypto is an international market and the US’s share of that market has plummeted since 2021 (discussed at length in many updates, though not recently).

Pay attention to what’s going on with the US dollar. Also remember that it doesn’t matter as much as it used to.

Metrics, charts, and direction

Let’s also pay attention to the metrics and changes in behavior so we have a reality check.

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