Bitcoin Tumbles as Dollar Soars on Fed Rate Hike Pause
Bitcoin is facing a price slide as the U.S. dollar strengthens. This comes amidst expectations that the Federal Reserve will hold off on interest rate cuts in May, potentially keeping rates higher for longer.
Dollar’s Mighty Run:
• The U.S. dollar is enjoying its strongest 5-day stretch in 14 months.
• This surge is likely due to investors seeking higher returns on U.S. bonds and deposits, fueled by the Fed’s hawkish stance on rates.
• The Bloomberg Dollar Spot Index (BBDXY) has jumped 2%, its biggest gain in 14 months.
• The dollar’s strength is reflected in its index score, which has climbed against major currencies like the euro and yen.
Bitcoin Feels the Pinch:
• Bitcoin’s price has dropped 9% over the past five days.
Historically, Bitcoin and the dollar often move in opposite directions.
A stronger dollar can make Bitcoin less attractive as an investment.
Fed’s Mixed Signals:
Fed Chair Powell has indicated inflation is not cooling down as fast as expected, potentially delaying rate cuts.
Halving Looms, But Sentiment Shifts:
The Bitcoin halving event (reducing new coin creation) is just days away on April 20th.
• Unlike the 2020 halving, investors are currently showing more interest in alternative cryptocurrencies compared to Bitcoin.
• This is reflected in Bitcoin’s dominance index, which is lower than in 2020, suggesting a more spread-out crypto market.
• The rising dollar and Fed uncertainty have also contributed to a more cautious sentiment in the crypto market.
In short, Bitcoin is struggling against a resurgent dollar and a wait-and-see approach from investors due to the Fed’s unclear rate policy.
