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As Bitcoin’s price approaches $100,000, an analyst stated that the strength of the U.S. dollar could make price increases more difficult.
Bitwise European Head of Research André Dragosch said in an interview with The Block:
“The appreciation of the dollar could limit bitcoin’s upside, as the historical performance of bitcoin tends to suffer during periods of dollar strength. Additionally, dollar appreciation often signals tighter global liquidity, which could be a headwind for bitcoin in the near term.”
“What is more is that our own quantitative models imply that the US Dollar is currently the most important macro factor with respect to the performance of Bitcoin and monetary policy as well as global growth expectations have become less important lately.”
According to TradingView, the U.S. dollar index rose from 103.42 to 105.93 on election day.
The Impact of Interest Rate Investors Lowering Rate Cut Expectations on Bitcoin
The recent macroeconomic developments can significantly impact Bitcoin by influencing investor risk appetite and market liquidity. When investors lower their expectations for interest rate cuts by the U.S. Federal Reserve, this supports the strength of the dollar. A stronger dollar can make alternative assets like Bitcoin less attractive, potentially dampening demand and slowing price growth.
Another factor to consider is the expectation that the Bank of Japan (BoJ) will raise interest rates. Such expectations have caused the yen to strengthen against the dollar. Similar shifts have previously led to market events like the unwinding of the yen carry trade in August, which triggered major liquidations in risk assets, including Bitcoin and the broader crypto market.
Data released last Friday showed that consumer prices in Tokyo rose for the first time in three months, reinforcing the likelihood of a BoJ rate hike in December. BoJ Governor Kazuo Ueda noted that Japan’s economy is moving towards wage-driven inflation and emphasized the need to avoid keeping borrowing costs too low.
These developments could further influence market dynamics, creating potential headwinds for Bitcoin’s price growth.
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