In the recent discussions surrounding Bitcoin (BTC) and its possible future price development, crypto enthusiasts and analysts alike are discovering new connections that need to be analyzed. In particular, a correlation with the EURUSD currency pair (the euro against the US dollar) has come into the spotlight due to a Twitter thread by respected analyst Josh Olszewicz.
Olszewicz first sets the stage by drawing attention to the widely recognized inverse correlation between Bitcoin and the DXY (US Dollar Index). He states: “Most are aware of the strong historical inverse correlation between BTC and DXY. DXY is a USD index against a basket of currencies that has a EURUSD weighting of around 58%. Therefore, the BTC-EURUSD correlation should also be relatively high.”
Will Bitcoin Price Follow EURUSD?
What is interesting here is the observation that Olszewicz makes about the BTC-EURUSD correlation in the period after the pandemic and the last Bitcoin halving. He mentions that “post-pandemic (post-halving), the EURUSD pair has led BTC in both the bullish and bearish directions, by a month to a full year.”
Bitcoin vs EURUSD | Source: X @CarpeNoctom
Bitcoin vs EURUSD | Source: X @CarpeNoctomIf this pattern continues, we could see some bearish trends in Bitcoin. Olszewicz further suggests: “If this relationship continues to hold, BTC should fall towards the BTFP low of $20,000.” This statement is significant and suggests a possible significant decline from the current position, all based on the Movement patterns of the EURUSD.
He further supports this prediction by highlighting a technical pattern seen in both BTC and EURUSD, stating: “EURUSD has completed a bearish H&S similar to BTC, providing technical fuel for further downside.” A “bearish H&S” refers to the bearish “head and shoulders” pattern, a chart formation that predicts a trend reversal from bullish to bearish.
However, it’s not all doom and gloom. Olszewicz gives Bitcoin bulls a glimmer of hope. He posits: “If you are bullish on BTC here, you are either hoping that this relationship weakens/breaks, or that EURUSD starts getting stronger rather than continuing to weaken.”
BTC’s second high doesn’t fit
Olszewicz also touches on some “aluminum” speculation and discusses how the BTC-EURUSD correlation appeared to be disrupted during Bitcoin’s second high in November 2022. He points out that EURUSD’s ongoing decline has not had an immediate impact on Bitcoin’s uptrend and suspects that major crypto players such as 3AC, FTX/Alameda and the Anchor BTC Reserve may have played a role .
He explains: “It is both possible and likely that the strange behind-the-scenes dealings of 3AC & FTX/Alameda, as well as the anchor BTC reserve, helped delay the inevitable downtrend by about a year.”
Bitcoin EURUSD | Source: X @CarpeNoctom
Although correlations can be informative, they are by no means a guarantee of future market movements. Investors should exercise caution when making investment decisions and conduct their own research. Rose Premium Signals added: “Interesting observation on BTC-EURUSD correlation.” When doing cryptoanalysis, it is important to consider several factors. The relationship could actually evolve and influence BTC’s future movements.”
At press time, BTC was trading at $26,180.
Bitcoin price falls, 1-day chart | Source: BTCUSD on TradingView.com
Bitcoin price falls, 1-day chart | Source: BTCUSD on TradingView.comFeatured image from iStock, chart from TradingView.com
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