A closely followed crypto analyst is predicting an epic short squeeze for Bitcoin (BTC) as he believes the US dollar index (DXY) is about to lose steam.
Crypto strategist Kevin Svenson tells his 116,200 Twitter followers that the DXY looks poised to finally end its parabolic ascent.
“The DXY is about to break below the parabola folks. If it does, a huge BTC rally is likely to occur.”
Traders keep a close watch on the performance of the DXY as a slumping index indicates that deep-pocketed investors are moving their capital away from the safety of the US dollar and allocating into risk-on assets like crypto and stocks.
Looking at the analyst’s chart, DXY’s parabolic rally started in February this year. Since then, Bitcoin has lost nearly 60% of its value after nose diving from $45,000 to its current value of $19,259.
At time of writing, the DXY is trading at 112 points, still resting above Svenson’s support area.
According to the crypto analyst, BTC’s inability to put together a considerable rally is due to the continued strength of the DXY.
“The next piece of the puzzle for this rally to continue is the DXY. Today, it’s up a bit so BTC stalled. Market participants waiting for further moves from the US dollar index most likely.”
However, Svenson thinks that once the DXY’s parabolic rally finally comes to a close, Bitcoin could ignite a massive short squeeze in just one day.
“If we bounce here, it’s going to crush a lot of short positions and would likely generate a +20% god candle.
Never doubt BTC’s capability to move like this.”
A short squeeze happens when traders who borrow units of an asset at a certain price in hopes of selling them for a lower price to pocket the difference are forced to buy assets back as the trade moves against their bias.
Featured Image: Shutterstock/Tithi Luadthong
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