The global outage caused by the system update from CrowdStrike, a cybersecurity company, disrupted IT systems across banks, airlines, and communication services. This event, potentially the largest IT outage in recent history, highlights the issues of digitalization and interconnection in society's processes and the disadvantages of centralization. In contrast, Bitcoin and the values of decentralization have stood out during this crisis, which is reflected in its price as it broke through resistances and diverged from indices and equities, which experienced a negative day.
The German government has finally emptied its Bitcoin wallets, and the Mt. Gox trustee has executed one of the largest distributions to the Kraken exchange midweek without unleashing a collapse and causing the FUD to dissipate from the market. This shift in sentiment is evident as our metrics continue to turn more optimistic (take a look at the risk speedometer in particular), signaling a better outlook for a bullish approach in the short to medium term. Additionally, the recent attempt on Donald Trump's life over the past weekend has increased the likelihood of a U.S. government more friendly towards crypto assets, contributing to this optimism.
Nevertheless, we remain vigilant that the correction in US indices and equities, which saw the first negative close this week since the last week of May, could extend to the crypto market potentially stalling Bitcoin's advance. We have observed two interesting setups that have caught our attention: the development of the DXY (U.S. Dollar Index) and the volatility of the VIX (Volatility Index).
Figure 1: Speedometers indicating the current state of BTC.
DXY compressing, VIX stretching.
U.S. indices and equities had a negative weekly close due to uncertainty and political turmoil caused by the assassination attempt on Donald Trump and the indecision surrounding the potential derailment of Joe Biden's presidential candidacy. In this environment, the DXY, which indicates the strength of the dollar, has continued its upward trend, which was established in July of last year, marking higher lows and higher highs and creating a large compression zone in an ascending triangle. These patterns typically end with an explosive breakout either upwards or downwards.
We remain mindful that if the past weekend's events had unfolded differently, the resolution of this compression zone would likely have been to the upside, resulting in a stronger dollar and a collapse in indices and equities.
Figure 2: DXY price development.
On the other hand, the VIX, which measures the volatility of the S&P 500—or in other words, the market sentiment's fear projection—
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