Ethereum Price Volatility Linked to US Dollar Index Breakdown

A new technical analysis by Trader Tardigrade has shed light on the relationship between Ethereum's price volatility and the US Dollar Index (DXY). According to the analysis, there is an inverse correlation between the two, with DXY peaks often coinciding with Ethereum bottoms.

The study used Perplexity AI to examine the data-backed explanation of this relationship. The results showed that DXY has a significant impact on Ethereum's price movements, particularly during periods of changes in monetary policy.

The analysis found that up to 60% of Ethereum's volatility can be attributed to its inverse correlation with DXY. This means that whenever the dollar is strengthening, capital tends to rotate to perceived safe assets, causing selling pressure on risk assets like Ethereum.

On the other hand, when DXY weakens, liquidity conditions ease, and this encourages inflows into cryptocurrencies like Ethereum. If the current DXY breakdown extends, it could favor inflows into Ethereum and potentially lead to a rally in the cryptocurrency.