Bitcoin inside the dollar milkshake

The dollar milkshake theory states that in an environment in which fiat currencies are devalued, the dollar ends up being a refuge of relative value because it serves to pay off debts and take refuge from even more unstable governments. It is a particularly useful theory to evaluate why Bitcoin has not performed well in the times of skyrocketing inflation we are living in. Despite having better monetary policy, debts are still being paid off in dollars.

When the cycle reverses and capital flows out of assets such as stocks and other securities with long-term appreciation expectations, the dollar is the transit point. Because money is accumulated and is waiting to be invested or spent. In the case of the crypto world, we have seen that stable currencies have ended up being the place where capital has been held when it looked like the cycle was starting to end.

Now, creditors are starting to receive juicy interest for saving, without the need to invest. This leads to a situation where asset purchases are discouraged by the ease of earning returns by lending to borrowers with good credit histories.

Technically, we see a bearish divergence in the DXY dollar index. It is not confirmed, because it has not lost support. But a divergence is possible as the RSI does not print new highs on a daily scale.  

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How does this transfer to the crypto world? Stable currencies become more relevant, both in lending to speculators using leverage and in absorbing the new money supply generated from the issuers of the currencies.

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Bitcoin remains in the range where it began to form a month ago. It may be surprising given the turbulence experienced on the macroeconomic level, but at the moment we do not see new declining lows. And the lows are rising, and the highs are rising. But it is still range-bound and macro bearish. This gives us a possible target of USD 13,000, as part of the bearish continuation. The bullish price target is USD 29,000.

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