Bitcoin’s $BTC$78,204.36 Prices stopped falling in the past 24 hours. However, the prospects for a long-term recovery are dimming as the dollar index re-energizes and threatens to weigh on crypto prices.
Prices of major cryptocurrencies by market value have stabilized between $75,000 and $80,000 after a weekend decline that saw valuations fall from $85,000 to below $75,000. Some observers are hopeful that futures market dynamics will spark a rally above $80,000.
That’s possible, but the sustainability of the dollar index, which tracks the dollar’s value against major fiat currencies, is rising, raising questions about its sustainability. Some experts expect the dollar to remain at bid levels in the short term.
A stronger dollar increases the opportunity cost of holding dollar-denominated assets such as Bitcoin, gold, and commodities. All things being equal, a rise in DXY is typically bearish. $BTC. Furthermore, a strong dollar often leads to monetary tightening, making it more costly to flow capital and credit through the global economy and discouraging risk-taking in financial markets.
DXY rose 1.5% in two days to 97.60, marking its highest two-day price in nine months, according to data source TradingView. Concerns that incoming Federal Reserve President Kevin Warsh will take longer to cut interest rates are likely fueling the new economic upswing, consistent with the reputation as a “policy hawk” he earned during his tenure as Fed governor from 2006 to 2011.
“The dollar appears to be getting healthier. The subsidence trading that appeared to be the primary cause of last week’s selloff has begun to unwind since Kevin Warsh became President Donald Trump’s nominee for Federal Reserve Chairman,” ING analysts said in a note to clients.
Analysts added that upcoming US macroeconomic indicators, particularly non-farm payrolls, could spur a recovery in the dollar. The jobs report was originally scheduled for February 6, but was postponed due to the partial federal government shutdown.
“Our call is for 80,000 employees and an unchanged unemployment rate of 4.4%, which could set the stage for further stabilization/recovery in the dollar,” analysts said.
Matthew Ryan, head of market strategy, said there could be more room for the dollar to rebound.
“Although Mr. Warsh has recently aligned with Mr. Trump in calling for lower federal funds rates, the fact that he was seen as a hawk during his time as a Fed director in the late 1990s means he is probably less likely to advocate for rate cuts as aggressively as Mr. Hassett or Mr. Ryder,” Ryan explained in an FXStreet blog post.
