Bitcoin has reclaimed the $85,000 range, yet the sustainability of further gains remains uncertain as the cryptocurrency consolidates in a horizontal pattern. Macroeconomic factors, including Federal Reserve policies and the declining dollar, are shaping market sentiment.
Fed Revises Economic Outlook Amid Political Pressure
The Federal Reserve’s recent policy stance has drawn sharp reactions from market analysts and political figures alike. Former President Donald Trump has urged the Fed to cut interest rates, arguing that U.S. tariffs will gradually impact the economy. However, the Federal Open Market Committee (FOMC) has opted against further cuts, instead revising its economic projections downward.
Key revisions include a lowered GDP growth forecast from 2.1% to 1.7%, a higher unemployment projection of 4.4%, and increased inflation expectations, with PCE inflation now estimated at 2.7% and core PCE at 2.8%. The downward adjustments paint a picture of weaker growth and persistent inflation, leading to a decline in the U.S. Dollar Index (DXY).
Liquidity and Market Response: A Boon for Bitcoin?
Real Vision’s chief crypto analyst, Jamie Coutts, believes the latest FOMC moves signal an effective end to quantitative tightening (QT) in the near term. He highlights a drop in Treasury yield volatility and its correlation with the DXY downturn as indicators of increased liquidity, which historically benefits Bitcoin.
“After last night, QT is effectively dead (for some time). Treasury volatility has backed right off and is now mirroring the decline in DXY from earlier this month. This is all extremely liquidity-positive,” Coutts noted.
After last night, QT is effectively dead (for some time). Treasury volatility has backed right off and is now mirroring the decline in DXY from earlier this month. This is all extremely liquidity-positive. https://t.co/PYFVf4uLfa pic.twitter.com/PVXCPnstrc
— Jamie Coutts CMT (@Jamie1Coutts) March 20, 2025
However, analyst Benjamin Cowen remains cautious, stating that QT remains in effect, albeit at a slower pace, with $35 billion per month still rolling off mortgage-backed securities.
Bitcoin’s Lagging Correlation with DXY
VanEck’s Head of Digital Assets Research, Mathew Sigel, suggests that Bitcoin typically reacts to DXY movements with a 10-week lag. If this trend holds, the recent DXY weakness could pave the way for a Bitcoin rally in the coming months.
Meanwhile, BitMEX co-founder Arthur Hayes remains wary, questioning whether Europe’s military-driven fiscal expansion could counteract the U.S.’s shifting liquidity dynamics. While Hayes speculates that Bitcoin’s recent dip to $77,000 may have marked the bottom, traditional market risks could still influence short-term price action.
Also Read: Bitcoin Hits $87K, Cardano Surges – New ADA ATH Incoming?
Bitcoin’s next major move will depend on evolving global liquidity conditions and macroeconomic factors. With the cryptocurrency historically tracking an inverted DXY, the coming weeks could determine whether a delayed rally materializes. For now, Bitcoin remains at a critical juncture, with its price movement contingent on broader economic developments.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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