First Mover Americas: Bitcoin Struggles as Dollar Breaks Multi-Year Bearish Trend Line

Good morning, and welcome to First Mover, our daily newsletter putting the latest moves in crypto markets in context. Sign up here to get it in your inbox each weekday morning.

Here’s what’s happening this morning:

And check out the CoinDesk TV show “First Mover,” hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9 a.m. U.S. Eastern time.

By Omkar Godbole

While bitcoin has held vital support, the cryptocurrency does not appear to be out of the woods yet, given the continued strength of the U.S. dollar.

The top cryptocurrency by market value traded near $40,700 at press time, having printed a high of $41,250 during the Asian hours. On Monday, buyers held the three-day chart 200-period moving average, staving off a major technical breakdown.

The dollar index (DXY), which tracks the greenback’s value against majors, rose to 101 early today, refreshing two-year highs and taking the month-to-date gain to 2.5%. The global reserve currency has risen 12% since May 2021, marking its best stretch since its run-up in late 2014 – early 2015, per data provided by charting platform TradingView.

The DXY may see further gains, as the monthly chart shows the two-decade bearish trendline has been breached to the upside.

“We’ve been warning that USD strength is one of the biggest headwinds for markets, including BTC and crypto. As BTC struggles to keep its head above $40K, the U.S. dollar index (DXY) just broke 100 for the first time in almost two years,” analysts at Delphi Digital wrote in a note published Monday. “The greenback is now on the verge of a multi-decade breakout as two of its major currency pairs (EUR and JPY) are both vulnerable of technical breakdowns of their own. The EUR and JPY make up ~70% of the DXY index.”

“Looking back over the last 10 years, we can see how BTC’s price tends to trend in the opposite direction of DXY momentum. In other words, when the dollar is gaining momentum, BTC underperforms (and vice versa),” Delphi’s analysts added.

Ether, the second-largest cryptocurrency by market value, traded flat at around $3,050, having tested dip demand under the psychological support of $3,000 yesterday. The cryptocurrency has seen increased demand for December call options in recent weeks.

“Ethereum is caught between two powerful colliding forces: (declining on-chain activity + market correlation) vs. (institutional adoption + Web3),” Ilan Solot, partner at the Tagus Capital Multi-Strategy Fund, said in an email. “The latter will prove a secular shift, while the former is merely a cyclical dynamic. These cyclical forces are coiling ETH ever tighter into a spring.”

While top cryptocurrencies traded sideways, Terra’s LUNA and privacy-focused monero (XMR) chalked up double-digit gains. Terra’s algorithmic stablecoin UST replaced Binance USD (BUSD) as the third-largest stablecoin by circulation during the later hours of Monday. Monero is set to implement a hard fork in July to improve network security and fee changes, developers confirmed in a GitHub post.

By Helene Braun

The fast-growing popularity of the TerraUSD stablecoin comes with some risk because of its dependence on algorithms to hold its dollar peg.

“It’s all fun and games if you’re a $5 [billion] or $10 billion market cap stablecoin,” Tether Chief Technology Officer Paolo Ardoino said in an interview with CoinDesk at the Paris Blockchain Week Summit. But that can change the bigger that stablecoin’s market cap gets.

UST is now the third-biggest stablecoin on the market after Tether’s USDT and Circle’s USD coin (USDC), which are still significantly larger in terms of market cap. However, the native stablecoin of the Terra ecosystem has grown rapidly, from $180 million at the beginning of 2021 to over $17 billion in market capitalization as of April 18. Read The Full Story Here

Today’s newsletter was edited by Omkar Godbole and produced by Parikshit Mishra and Stephen Alpher.