Bitcoin Under Pressure As The Dollar Hits Historic Highs

As the U.S. dollar index (DXY) reaches new heights, Bitcoin struggles to maintain its critical support. Investors are closely watching the movements of the DXY and the monetary policies of the Federal Reserve, anticipating a short-term target of $80,000 for the queen of crypto.

The Rising DXY: Threat or Opportunity for Bitcoin?

The crypto markets are going through a phase of uncertainty. This week, the DXY surged to 109.37, a level not seen since November 2022, fueled by rising U.S. bond yields.

Indeed, the 10-year Treasury yields have reached 4.7%, reflecting investors’ concerns over persistent inflation and the economic policies of the new Trump administration.

Why does the rise of the DXY impact Bitcoin? Historically, Bitcoin has shown a negative correlation with the dollar index: when the DXY rises, risky assets, including cryptos, face downward pressure. Thus, BTC dropped this week to $92,500, flirting with its key support at $90,000.

Despite this pressure, some analysts see an opportunity. Jamie Coutts, an analyst at Real Vision, points out that the Trump administration could bolster market liquidity, favoring a medium-term rebound for Bitcoin.

“The current strength of the DXY is putting pressure on Bitcoin, but the expansion of liquidity and the pro-crypto policies of the Trump administration could reverse the trend in the medium term.” he stated.

A Realistic Short-Term Target of $80,000?

Burkan Beyli, co-founder of Biyond, provides a cautious analysis of the situation: “A Bitcoin below $94,000 would pave the way towards $81,000 in the next five weeks.” He emphasizes the importance of the technical level of $95,180 for the upcoming week, especially with the upcoming release of the Consumer Price Index (CPI).

However, not all analysts share this bearish view in the medium term. Jamie Coutts from Real Vision downplays the impact of the dollar’s current strength, instead emphasizing the prospects for liquidity expansion and the pro-crypto orientation of the future Trump administration.

The current volatility in the crypto market is set against a broader backdrop of financial market readjustment, as players try to anticipate the implications of future U.S. economic policies. While a short-term correction seems likely, the fundamentals of Bitcoin remain solid for many analysts who maintain optimistic long-term outlooks.