Bitcoin faced selling pressure in September as the U.S. dollar rose against major currencies for the first time in six months.
- Bitcoin fell by over 7% over the period, the biggest monthly percentage decline since March, according to CoinDesk's Bitcoin Price Index.
- Back in March, prices fell by nearly 25% as the coronavirus-induced crash in the global equity markets triggered a global dash for cash, sending the dollar higher.
- Bitcoin's latest monthly decline is again accompanied by an uptick in the greenback.
- The Dollar Index (DXY), which tracks the greenback's value against majors, gained nearly 1.8% in September – the first monthly rise since March.
- "BTC seems to be sensitive to a stronger dollar in the short term," Mike Alfred, CEO of Digital Assets Data, told CoinDesk in an email.
- Bitcoin has moved largely in the opposite direction to the DXY since the coronavirus crisis slammed markets in March.
- The top cryptocurrency by market cap, bitcoin rallied from $3,867 to $12,400 in the five months to mid-August before falling back to $10,000 last month.
- Heading the opposite way, the DXY topped out at 103.00 in March and fell to a 16-month low of 91.75 in August. The index rose back above 95.00 last month.
- The S&P 500, Wall Street's equity index, and gold have moved more or less in lockstep with bitcoin over the past 6.5 months.
- However, these correlations may be coincidental, according to Alfred – that is, the dollar has been influencing price action in the major markets as well as bitcoin.
- The Federal Reserve's massive liquidity injections drove the dollar lower in the second quarter and the majority of the third quarter, yielding a rally in all major assets priced in the greenback.
- As such, the DXY's corrective bounce in September put pressure on bitcoin, gold, and equities. The greenback looked at its most oversold in nearly 40 years during August.
- Long-term sentiment remains bullish, as evidenced by a continued decline in the number of coins held on exchanges – a sign of investors shifting to holding strategies.
- In the short run, the cryptocurrency could continue to take cues from the U.S. dollar and the stock markets.
- "We can't ignore the greenback's breakout from its recent consolidation and expect a continued rally in the dollar to weigh over BTC," said Matthew Dibb, CEO of Stack Funds.
- Additional bearish pressure may emerge from potential outflows from tech-heavy stocks and the Nasdaq, Dibb added.
- According to a tweet from chart analyst and trader Josh Rager, bitcoin's late September recovery from $10,000 to $10,800 has kept the bullish price structure intact.
- Rager now foresees a green month for markets in October ahead of the U.S. elections.
- At press time, bitcoin is trading near $10,888, up 1.93% on the day.