The strengthening of the US dollar and the unchanged policy of the Federal Reserve are putting pressure on the cryptocurrency market, especially on Bitcoin.
Fed's Situation and Dollar Index
The Dollar Index (DXY) has risen above 99.98 points, marking a two-month high. This surge coincides with the Federal Reserve's decision to keep interest rates between 4.25% and 4.50%. Such actions, analysts note, create instability in the cryptocurrency market as investors prefer safer assets.
Historical Relationship Between Bitcoin and Dollar
This situation is not new. Throughout its history, Bitcoin has often shown an inverse correlation with the Dollar Index. When the dollar strengthens, investors tend to flee from cryptocurrencies, leading to declines in Bitcoin's price. In the current scenario, Bitcoin briefly fell to $115,760 before recovering, highlighting that its resilience is finite.
Future of Bitcoin in a Strengthening Dollar Environment
It is no secret that Bitcoin's future is now in question. If the Federal Reserve continues to hold rates and the dollar index keeps climbing, there will be few opportunities for Bitcoin's growth. However, the cryptocurrency market is known for its adaptability, and possible economic issues may once again change its trajectory.
Thus, the dollar's strengthening and stable interest rates create challenging conditions for Bitcoin, highlighting its negative correlation with the Dollar Index. This requires investors to be attentive to macroeconomic dynamics.
