Crypto markets faced a significant downturn for the second consecutive day, as the US Dollar Index (DXY) surged to new highs, driven by rising Treasury yields and investor concerns over the Federal Reserve’s monetary policy direction. The DXY, which initially began the week with a 0.92% decline, quickly rebounded, hitting levels not seen since November 2022, reaching 109.37.
The shift in market sentiment was further compounded by a sharp rise in US Treasury yields, with the 10-year note climbing to 4.7% and the 30-year note hitting 4.93%. The uptick in yields reflects growing concerns among investors that inflation will remain elevated, with expectations that President-elect Donald Trump’s economic policies could lead to expanded deficits. These fears have driven the market to price in the potential for higher long-term US debt, alongside the possibility of inflationary pressures despite potential growth boosters.
Bitcoin (BTC), which had shown resilience with a brief rally to $102,000 earlier in the week, found itself under pressure as the DXY gained momentum. As the index strengthened, BTC prices slipped to an intra-day low of $92,500, triggering concerns that a breakdown below the critical $90,000 support level could lead to further price declines in the short term.
Despite these challenges, some analysts remain optimistic. Burkan Beyli, co-founder of Biyond, and Real Vision’s chief crypto analyst Jamie Coutts both downplayed the significance of the DXY’s recent strength. They argued that the anticipated liquidity expansion and pro-crypto stance of the incoming Trump administration would likely provide a more favorable environment for crypto assets, especially in the longer term.
With the strong dollar becoming a real problem, I expected Bitcoin to be in the $80,000 range by now. This speaks to the strength of the underlying bid and the market's expectations that the Fed will have to act; otherwise, things will start breaking.
— Jamie Coutts CMT (@Jamie1Coutts) January 7, 2025
Regardless of the… pic.twitter.com/uVYYbpRv2o
As Bitcoin faces pressure from the DXY’s strength and rising Treasury yields, investors are closely monitoring the support levels and potential macroeconomic shifts that could influence the next phase of the crypto market’s recovery.
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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