Bitcoin price at risk? US Dollar Index confirms bullish ‘golden cross’

The Dollar Strength Index (DXY) accomplished its highest level in almost 10 months on Sept. 22, suggesting growing self-confidence in the United States dollar compared to other fiat currencies like the British pound, euro, Japanese yen and Swiss franc.DXY “golden cross” confirmedMoreover, investors are concerned that this surge in need for the U.S. dollar may pose challenges for Bitcoin (BTC) and cryptocurrencies, although these issues are not necessarily interconnected.U.S. Dollar Index (DXY). Source: TradingViewThe DXY confirmed a golden cross pattern when the 50-day moving typical exceeded the longer 200-day moving average, a signal often viewed as a precursor to a bull market by technical analysts.Impacts of the economic downturn and inflation risksDespite some investors thinking that historical patterns are figured out solely by price patterns, its crucial to keep in mind that in September, the U.S. dollar displayed strength, even in the face of concerns about inflation and financial growth worldwides largest economy.Market expectations for U.S. gdp growth in 2024 hover at 1.3%, which is lower than the 2.4% typical rate over the preceding 4 years. This downturn is attributed to aspects such as tighter financial policy, rising rates of interest and decreasing financial stimulus.However, not every boost in the DXY shows heightened self-confidence in the economic policies of the U.S. Federal Reserve. For example, if financiers decide to offer U.S. Treasurys and hold onto money, it recommends a looming recession or a substantial uptick in inflation as the most likely scenarios.When the existing inflation rate is 3.7% and on an upward trajectory, theres little reward to protect a 4.4% yield, prompting investors to demand a 4.62% yearly return on five-year U.S. Treasurys since Sept. 19, marking the greatest level in 12 years.U.S. 5-year Treasury yield. Source: TradingViewThis information unquestionably demonstrates that investors are preventing federal government bonds in favor of the security of money positions. This might seem counterproductive at first, but it lines up with the method of waiting on a more favorable entry point.Investors anticipate that the Fed will continue raising rates of interest, allowing them to record greater yields in the future.If financiers do not have self-confidence in the Feds ability to suppress inflation without triggering substantial financial harm, a direct link between a more powerful DXY and reduced demand for Bitcoin may not exist. On one hand, there is undoubtedly a decreased hunger for risk-on properties, evident from the S&P 500s negative performance of 4.3% in September. However, financiers recognize that hoarding money, even in money market funds, does not guarantee steady acquiring power.More cash in flow is positive for Bitcoins priceAs the government continues to raise the debt ceiling, investors deal with dilution, rendering small returns less substantial due to the increased cash supply. This explains why limited properties, such as Bitcoin, and some leading tech business might perform well even during an economic slowdown.Related: How much is Bitcoin worth today?If the S&P 500 continues its sag, then financiers might exit risk markets regardless of their shortage or development potential, at least. In such an environment, Bitcoin could indeed face negative performance.However, its important to keep in mind that this analysis ignores the truth that the exact same pressures from inflation and recession will likely increase the cash supply, either through additional Treasury debt issuance or the Feds bond purchases in exchange for U.S. dollars.Either method, increased liquidity in the markets tends to prefer Bitcoin since investors might look for sanctuary in alternative possessions to secure against “stagflation” — a situation marked by stagnant financial growth together with widespread inflation.Therefore, the DXY golden cross might not necessarily be a net unfavorable for Bitcoin, especially on longer timeframes.This post is for general information functions and is not meant to be and need to not be taken as legal or financial investment recommendations. The opinions, thoughts, and views revealed here are the authors alone and do not always show or represent the views and viewpoints of Cointelegraph.