Bitcoin Struggles at $90K Resistance Amid Rising Dollar Strength and Financial Uncertainty
All we can say is that investors shouldn’t fight the current trend of a strengthening U.S. dollar, ING advised. Bitcoin (BTC) is encountering resistance at the $90,000 level identified by CoinDesk last week, as foreign exchange traders turn their attention to the recent surge in the dollar index (DXY). This rise in the DXY has raised concerns about financial tightening, which often impacts risk assets like cryptocurrencies.
Since early Tuesday, BTC’s rapid ascent has hit a speed bump at the $90,000 resistance level, with prices briefly dropping to $85,000, according to CoinDesk data.
It’s not uncommon for markets to pause after such a dramatic $20,000 rally over just a week, surpassing previous all-time highs. These pauses typically allow bulls to regroup and re-energize for the next upward move, and options market data from QCP Capital shows traders are positioning for a breakout to the $110,000-$120,000 range.
Betting on a Dollar Rally
It might not be a coincidence that this pause in BTC’s rally has coincided with reports of traders betting on the continued strength of the dollar index, which tracks the U.S. currency against major global fiat currencies.
“Trading volumes and volatility are increasing as investors and corporate treasurers position themselves in anticipation of a stronger dollar,” ING said in a note on Tuesday. “We’d advise against fighting this emerging trend.”
Both BTC and USD have seen significant gains since Donald Trump’s election victory a week ago, with the DXY rising 2.7% to 106.78 — the highest level in six months, according to TradingView.
Persistent strength in the dollar, however, could re-establish the historical negative correlation between BTC and the USD, potentially slowing BTC’s rise or halting it entirely.
Rising Bond Yields Add to Financial Uncertainty
The yield on U.S. Treasury notes is also climbing, providing additional support for the dollar. The yield on the two-year Treasury note rose to 4.36% on Tuesday, its highest level since July 31. Meanwhile, the 10-year note hovered close to the multi-month high of 4.46% reached last week.
This market movement reflects concerns that President-elect Trump’s proposed policies, especially those focused on mass deportations, could drive inflation and make it more difficult for the Federal Reserve to cut interest rates next year.
“Strong immigration was a key factor that helped central banks — including the Federal Reserve — maintain relaxed inflation expectations post-COVID,” Dario Perkins, managing director of global macro strategy at TS Lombard, explained in a recent note. “Reversing this trend by sending millions of people back to their countries of origin could recreate the inflationary pressures we experienced two years ago.”
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