(Kitco News) - The cryptocurrency market fell under pressure alongside global financial markets on Thursday as the U.S. dollar index (DXY) surged to an intraday high of 109.995, its highest level since September 2002.
DXY 1-week chart. Source: TradingView
Few assets were spared as the dollar charged higher, with the S&P 500, DOW and NASDAQ all in the red at the time of writing, down 1.03%, 0.45% and 1.81%, respectively.
Data from TradingView shows that Bitcoin (BTC) fell under pressure in early trading on Thursday, which dropped the top cryptocurrency to a low of $19,582 near midday before it was bid back to support at $19,800.
BTC/USD 4-hour chart. Source: TradingView
The jump in volatility was anticipated by Senior Kitco Market Analyst Jim Wyckoff, who warned in his morning Bitcoin brief that “Quieter sideways trading continues, but probably not for long. History shows the month of September can be rocky for the financial markets.”
As for when the volatility will subside, Wyckoff suggested that it could continue for some time as bullish traders continue to be overwhelmed by bears.
“Look for more volatility in the cryptos in the near term. Bitcoin bulls need to show more power to break the price downtrend that is still in place on the daily chart, albeit just barely,” Wyckoff said.
Further evidence that the sentiment surrounding Bitcoin remains negative was provided by the crypto analytics firm Santiment, which posted the following chart showing the rise in BTC average funding rates.
Bitcoin average funding rates. Source: Santiment
“Traders continue to short whenever prices see a notable price dump. According to the BTC average funding rate across Binance, BitMEX, DYDX, and FTX, the reaction to Friday's drop was the most aggressive traders went against markets since May,” Santiment said in the Tweet accompanying the chart.
Ethereum shorts pile on
One of the biggest stories in crypto currently is the upcoming Ethereum (ETH) Merge, which is predicted to occur on Sept. 15.
While many had anticipated a “buy the rumor, sell the news” type of event, it's starting to look as though the Merge has already been factored in, leading investors to position themselves ahead of a potential price drop.
Evidence for the bearish positioning ahead of the Ethereum merge is shown in the following chart from Santiment, who noted that “The Ethereum disbelief is strong from traders during a particularly volatile week of trading. The crowd has shorted, across exchanges, at the largest ratio since June of 2021.”
Ethereum average funding rates. Source: Santiment
Santiment did offer a warning to go along with the anticipated pullback in Ether price, highlighting the fact that “Historically, price rises are more prevalent in these conditions.”
As it stands now, Ether is down 0.93% on the 24-hour chart and trading at a price of $1,554.
A quiet day in the altcoin market
Overall, it was a negative day for the crypto market, with relatively few bright spots amid a sea of red.
Daily cryptocurrency market performance. Source: Coin360
Out of the top 200 coins listed on CoinMarketCap, the best performer for the day is Decred (DCR), which put on a gain of 11.7$, followed by an 11% increase for Balancer (BAL) and a nearly 7% increase for the beleaguered Celsius (CEL) token.
The overall cryptocurrency market cap now stands at $967 billion, and Bitcoin’s dominance rate is 39%.
