However, certain banks anticipate ongoing strength in the dollar due to diverging interest rate outlooks and concerns over potential U.S. tariff implementations.
It is the experience of crypto traders that says that the U.S. dollar might get weaker again. This will make them take more risks and extend the rally in Bitcoin (BTS). However, some banks think that the dollar will maintain its position in the market.
According to the latest reports from Coindesk, the worth of Bitcoin has mainly balanced between $60,000 and $70,000, since mid-March. The rise in Bitcoin’s price started last October, but now it has slowed down, mainly because people don’t think the Federal Reserve will cut interest rates. Also, as compared to other currencies, the worth of the dollar has gone up.
According to reports from TradingView, the DXY started at 102.35 on March 8th and went up to its peak value in five months, reaching 106.52 last week. Since then, it has pulled back slightly to 105.70, giving hope to crypto bulls.
A value investor and founder and managing partner at value fund Alpine Fox LP said on X Tuesday, “DXY dollar index crossed a barrier at 106, just as he predicted, and now it’s starting to go down. I think that it might go back to around 102-103, which could boost this upward trend. I firmly believe that this timing makes sense because Bitcoin is likely to reach &90,000 soon”. Looking further ahead, Mike also thinks the DXY could drop to 92, maybe by late 2025.
The U.S. dollar is an international reserve and invoicing currency, which is actively participating in global debts, non-bank borrowing, and global trade. When the dollar gets stronger, it creates debts in dollars more expensive, which makes people less likely to take risks in financial markets. However, a weaker dollar has the opposite effect. As such, over the years, bitcoin and the broader crypto market have tended to move in the opposite direction of the DXY, just like stocks and gold.
The co-founders of Glassnode, Jan Happel and Yan Allemann, who use the name Negentropic on X, said “It seems like the dollar has reached its highest point in an “expanding triangle” pattern”. They think that it might go down in the next few weeks, which could make the crypto market go up.
The expanding triangle is figured out by diverging trendlines connecting higher highs and lower lows. The DXY has started going down from where it touched the upper line and might go down to around 103 next month.
However, some banks don’t think the dollar will get weaker soon. According to Societe Generales Cros Asset Research Team, led by Kit Juckes, they believe the Federal Reserve won’t lower interest rates until 2025. This could make the DXY dollar index reach somewhere between 107 and 110.
“If the market now adjusts to our forecast of lower rates in 1Q25 (and no further hikes), then peak 2s [two-year yield] should be around 5-51/4%, pointing to some, but not much more, DXY upside,” the research team said in a note to clients on April 18.
Crypto traders should keep an eye on the possibility of a trade war between the U.S. and China, as it could make the U.S. dollar stronger. Last week, U.S. President Joe Biden suggested raising the tax rate on certain Chinese steel and aluminum products from 7.5% to 25%. A tariff is a tax that governments put on goods brought into the country, and it can make prices go up.
