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The breakdown of Bitcoin’s decline this week: The lowest point of the dollar marked the peak for BTC.
It feels like a long time ago, but bitcoin reached just under $91,000 on Wednesday. Subsequently, the U.S. dollar began to gain strength.
Bitcoin experienced a decline this week as the dollar appreciated (CoinDesk)
Key points:
- Bitcoin was initially showing gains this week while the U.S. dollar dipped below a significant technical threshold.
- This trend reversed on Wednesday afternoon, however, as the Fed maintained its policy stance and speculation increased regarding who might be the next Fed chair.
- The leak on Thursday night regarding Kevin Warsh’s nomination triggered a surge in the dollar and a rapid drop in bitcoin.
Bitcoin’s drop late this week may have been less influenced by crypto-specific elements and more by the strength of the U.S. dollar.
Following what has become a typical weekend downturn in crypto prices, bitcoin was actually increasing throughout the week, partly due to the U.S. dollar’s decline gaining momentum.
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Bitcoin reached its peak for the week late Wednesday afternoon, just under $91,000, as the Fed kept rates unchanged and focus shifted to who President Trump might nominate as the next head of the U.S. central bank.
This peak aligned with a drop in the dollar index (DXY) to a multi-year low of 95.34. Generally, a weaker U.S. dollar is perceived as beneficial for asset values, including bitcoin, stocks, and commodities.
Despite technicians warning that a DXY below 96 suggested even further declines for the dollar, the markets had a different view. The dollar began a gradual rise, and concurrently, bitcoin started retreating from the $91,000 mark.
The dollar continued to gain strength into Thursday, with bitcoin’s losses becoming more pronounced throughout the session. Ultimately, the evening leak regarding Kevin Warsh (and his hawkish stance) being nominated as Fed chairman led to another surge in the dollar and a sharp drop in bitcoin, with BTC hitting a low of $81,000.
Bitcoin has since managed to recover to $83,000, but the dollar has continued to rise, leading to uncertainties about the sustainability of the cryptocurrency’s upward trend.
