Bitcoin traders and investors know that the price of the leading cryptocurrency is affected by the US dollar movements. This is evident in the direct correlation between Bitcoin and EUR/USD in the past several months.
A chart of the EUR/USD exchange rate shows different cycles from left to right. Unsurprisingly, Bitcoin followed the same trend. In October of last year, the EUR/USD bottomed out, and since then, there have been corrections, but the overall trend has remained in place.
When Bitcoin made a new lower low at the end of 2022, it bounced and rallied at the start of the new year. This was in line with the bullish trend of the EUR/USD. Every corrective or rally action on the EUR/USD pair was met with a similar reaction from Bitcoin.
Therefore, if Bitcoin holders hope to see the price break and hold above $30k, this is only possible with a bullish action on the EUR/USD. The volatility in the cryptocurrency space is much higher than in the traditional currency market, but this cannot be ignored.
It is evident that Bitcoin’s recent bullish trend is based solely on the dollar’s weakness. This has been influenced by the recent interest rate policy decisions from three central banks (Federal Reserve, European Central Bank, Bank of Japan).
For cryptocurrency traders, it is important to understand the direct correlation between Bitcoin and EUR/USD. This will give them a better insight into how Bitcoin’s price action is affected by the US dollar movements.
