A recent technical crash shared by cryptocurrency analyst Trader Tardigrade has added a noteworthy perspective to the discussion on how quickly Ethereum can enter a bullish phase or if we face further consolidation. In his post on X, he compared Ethereum to the US Dollar Index and then consulted Perplexity AI for a data-driven explanation of the relationship. The result was a match between DXY highs and Ethereum lows, pointing to a repeating inverse pattern which may now return to the game.
Ethereum Volatility Tied to the Dollar Index
Trader Tardigrade Technical Analysis focuses on the inverse relationship between Ethereum and the US Dollar Index (DXY). The monthly Ethereum candle price chart shows that the price structure is superimposed on DXY movements, with four main phases where the highs of the dollar coincide with the lows of the Ethereum cycle, and the reverse dynamics also play out.
A quick look at the chart shows that downtrends in DXY most often coincide with upward trends in the Ethereum price. According to Perplexity AI’s explanation, ETH has one of the clearest inverse relationships to DXY in the cryptocurrency market, in some cases even more pronounced than Bitcoin.
Whenever the dollar strengthens, capital turns towards perceived protected assets and risky assets such as Ethereum face sales pressure. On the other hand, when DXY weakens, liquidity conditions ease and that is it encourages the inflow of cryptocurrencies like Ethereum. According to the analyst, DXY has already broken out of long-term support and looks ready for further declines. DXY is currently at 97.8 and weakening. This could trigger a major surge in cryptocurrencies in the coming weeks, especially ETH.
Chart image with X. Source: @TATrader_Alan On X
AI Crash: How Much of ETH’s Moves Explain DXY?
In an AI-backed explanation, Perplexity pointed out that the inverse correlation between ETH and DXY could account for approximately 40% to 60% of Ethereum’s volatility, especially during periods of changes in monetary policy. This number is always more significant during interest rate increases and news events, although there are lags of days or months depending on the catalyst.
The historical table referenced in the analysis linked specific DXY highs to ETH turning points. For example, during the dollar surge in March 2020, Ethereum bottomed out and then began a multi-month rally while DXY continued to fall to 89.
Another leveling off was observed in 2022, when the dollar reached its highest level in many years in a broader phase of capitulation of risk assets. This, in turn, led to Ethereum creating a bear market. If the current DXY slump is prolonged, it could start favoring inflows into Ethereum again.
The green projection arcs on the chart suggest that a sustained decline in the dollar may open the door to the next phase of expansion for ETH, where the price will rise above $10,000. For Ethereum to rise above $3,000 again, this would need to happen be a confirmation of lasting dollar weakness with improving on-chain indicators and derivatives.
Featured image created with Dall.E, chart from Tradingview.com
