An increasingly weaker US dollar might bode well for Bitcoin, yet two indicators are raising concerns in the near term, according to Jamie Coutts, a crypto analyst at Real Vision.
Coutts stated, “While my framework is becoming bullish as the dollar declines, two indicators still trigger warnings: Treasury Bond volatility (MOVE Index) and Corporate Bond spreads,” in a post on X from March 9.
The analyst described Bitcoin as a “game of chicken” with central banks, projecting a “cautiously bullish” stance despite these alarming signs.
The US Dollar Index (DXY) fell to a four-month low of 103.85 on March 10, as reported by Market Watch. The DXY measures the value of the US dollar against a range of other currencies.
Coutts noted that US Treasuries act as global collateral, and a rise in Treasury volatility leads to collateral haircuts, which tightens liquidity in the market.
The MOVE Index, which gauges expected volatility in the US Treasury bond market, is currently stable but on an upward trajectory, he remarked.
MOVE Index and US Dollar Index. Source: Jamie Coutts
Coutts mentioned, “With the dollar’s steep drop in March, one might anticipate volatility to lessen, or if that doesn’t happen, for the dollar to rebound,” which would be bearish.
Increased Treasury volatility could lead to tighter liquidity conditions, which might prompt central banks to intervene in ways that could eventually benefit Bitcoin, he suggested.
At the same time, corporate bond spreads have been steadily widening over the past three weeks, and historical trends show that major reversals in corporate bond spreads often align with peaks in Bitcoin’s price, Coutts noted.
He summarized that these indicators generally reflect a negative outlook for Bitcoin. “Nevertheless, the dollar’s depreciation—one of the most significant in 12 years this month—remains the central focus of my analysis,” he added.
Related: Bitcoin dips to $80K in ‘ugly start,’ could retest key resistance: Hayes
On March 6, Bravos Research indicated that a declining DXY “could serve as a significant tailwind for risk-on assets,” including stocks and cryptocurrencies.
Coutts also mentioned other bullish elements, such as a global competition for strategic Bitcoin reserves or accumulation through mining, Michael Saylor’s Strategy acquiring an additional 100,000 to 200,000 coins for its BTC treasury this year, a potential increase in spot ETF positions, and greater liquidity overall.
“Consider Bitcoin a high-stakes game of chicken with the central planners. With their options shrinking—and presuming HODLers stay unleveraged—the odds are increasingly in favor of Bitcoin holders.”
Magazine: Bitcoin’s odds of June highs, SOL’s $485M outflows, and more: Hodler’s Digest
