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.
Bitcoin, gold, S&P 500 and Dollar Index price charts
Source: TradingView
  • 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.

Looking forward

  • 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.

Also read: Bitcoin May Return to Center Stage After Ethereum’s White-Hot Summer

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