BTC whales counter trading DXY strength as bitcoin price slips under $27K.

As summer approaches, financial markets are experiencing an unexpected heatwave caused by the uptrend of the U.S. Dollar Index (DXY) since late April. This surge in the dollar has raised concerns among market participants due to its high inverse relationship with Bitcoin (BTC), meaning that when the dollar rises, BTC falls and vice versa. However, some divergent signals suggest that this dollar rally could be nearing an end. The federal funds futures, which represent the market’s expectation of when the Federal Reserve’s hiking cycle will come to an end, are a leading indicator that traders follow to track this inverse correlation. Currently, the federal funds futures imply a terminal rate of 5.27%, suggesting that the market still anticipates the Fed to hike rates by at least 27 basis points beyond its current rate of 5%. If the federal funds futures were to fall back below the 94.50 level, as they did in March, it would become very likely that the market would fall back under heavy sell pressure due to this correlation.

This statement is particularly true if the DXY falls to new lows in 2023 and breaks its long-standing support level near 100. If this happens, BTC will have the opportunity to make a fresh push above $30,000.

There is one group of crypto market participants who appear to be anticipating such a reversal: Bitcoin whales.

Related: Last BTC price dip before a $30K breakout? Bitcoin wipes weekend gains

Bitcoin whale songs

Bitcoin whales are defined as wallet addresses that hold more than 10,000 BTC.

They are a type of smart money that on-chain data analysts study closely.

As shown in the chart below, Bitcoin whales (represented by red dots) have been steadily increasing their holdings on a net basis every day since April 17, a trend that coincided with Bitcoin’s year-to-date high above $31,000.

This behavior is different from previous trends, where whale wallets accumulated Bitcoin at market bottoms or on the way to higher highs, rather than at the top. This anomaly prompts a thought-provoking question: Have these whale wallets bought the top for the first time, or was April 17 not the peak?

This behavior from the largest players in the Bitcoin market raises doubts about the legitimacy of May’s DXY pump and adds uncertainty to bearish outlooks, especially when combined with the significant rise in federal funds futures.

As always, the market is working hard to keep participants one step behind the next trend.

What remains to be seen is how much the rise of terminal rates and the DXY in May can be attributed to escalating fears over the United States debt ceiling standoff. With that issue now in the rearview (pending final votes), one wonders whether or not this will lead to the dollar reverting back to its downtrend and Bitcoin heading back above the $30,000 mark.

For the rest of the second quarter, it will be crucial to closely monitor the movements of terminal rate expectations, the DXY, and Bitcoin whale activity, as these data points are likely to provide actionable clues prior to the next big move happening.

The upcoming weeks will undoubtedly shed light on these intriguing dynamics, shaping the path for both the U.S. dollar and the cryptocurrency market at large into the summer months and beyond.

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