Another Crypto Crash Today: Why?

In recent days, the crypto markets have been experiencing significant distress. 

Today, for instance, there was a new decline that might even seem like a crash, but in reality, it could just be part of a temporary movement before the start of a new bullrun. 

It is therefore necessary to clearly distinguish the analysis of short-term movements from those of medium-term movements. 

The Short Term

In the short term, the prevailing dynamic in the crypto markets actually originates from external factors. 

The original issue indeed lies in the rise of the Dollar Index. 

Shortly after mid-October, a mini-rally of the Dollar Index began, starting from around 98 points and culminating, for now, at today’s 100 points. 

It may seem like a minor move, but in reality, it is much more significant than it appears, because it has broken upwards through a descending channel that has been in place since January. 

Typically, in the year following the US presidential elections, the dollar weakens slightly, also because it often strengthens during the election year. 

In January, it even briefly reached 110 points, and since this is an index that fluctuates around 100 points, it was a level 10% above the long-term average. 

The subsequent decline, which practically began after Donald Trump took office at the White House, lasted until October 28th. Then, with the surpassing of 99 points, the descending channel was broken to the upside. 

Therefore, starting from October 30, the Dollar Index has entered a new mini-bull phase, which, however, might also reach its peak in these very days. 

The Impact on Crypto

This mini-bull phase of the Dollar Index caused the price of Bitcoin to drop first below $113,000, and then also below $110,000.

On October 30th, the first low peak was reached below $107,000, but starting from Monday, November 3rd, even the $106,000 level could no longer hold. 

Today, for instance, BTC has dropped below $104,000, and as long as the mini-bull phase of the Dollar Index continues, it could decline further. 

These movements in the price of Bitcoin have also influenced almost all other crypto, with a few exceptions. 

For example, Ethereum first fell below $4,000, then on October 30th it dropped below $3,700, and today it has also fallen below $3,500.

Using Total3 as a reference point, which is the total market capitalization of altcoins excluding stablecoins, Ethereum and Bitcoin, it first fell below $1.030 trillion, then dropped below $1 trillion on October 30, and has continued to decline today to $920 billion. 

Therefore, the entire crypto market is indeed struggling, despite a small number of cryptocurrencies that have recorded significant gains in recent days (likely temporary). 

The Medium Term

In the medium term, however, everything could change. 

In fact, not only does it seem that the local peak of the Dollar Index might be near, and could be reached in these very days, but there is even the possibility that its trend could reverse after the middle of the month.

In fact, not only might its mini-bull phase be nearing its end, but in the coming weeks, it could even manage to re-enter the descending channel that has persisted since January and was broken to the upside at the end of October. 

Obviously, there is no certainty that this will happen, but today the dynamic behind the mini bull phase of DXY, namely the devaluation of the Japanese yen, seems to have come to an end. 

Even against the Japanese yen, the dollar had entered a descending channel since January, although overall the decline had become minimal in recent months. 

This descending channel was broken to the upside precisely on October 30, but today USDJPY appears to have halted its mini-rally and seems to want to re-enter it. 

The Impact on Crypto

At this point, should the Dollar Index indeed stop rising in the coming days, and then start to decline after mid-month, it is possible to envision a trend reversal for Bitcoin as well, which could begin to rise again, pulling altcoins along with it. 

There is no certainty that this will happen, but it is a hypothesis that should be considered because the current trend of the Dollar Index closely resembles that of late 2017, and back then things ended up exactly that way.