Posted by Xoken.org – The United States (US) dollar currency is aiming for its best five-day record since February 2024, while Bitcoin (BTC) experienced a decline during that time. The projection of the US central bank’s benchmark interest rate remaining high has also put pressure on Bitcoin ahead of the halving on April 20.
The Kobeissi Letter said the strengthening of the US dollar was most likely driven by expectations of higher and sustainable US interest rates. “Less than a month ago, the market anticipated that the Fed would start cutting interest rates in June. However, interest rates will be higher for longer,” wrote The Kobeissi Letter in an upload on X, Wednesday (17/4 ).
Plans to cut the US benchmark interest rate have been pushed back to September and are expected to take place only twice, less than the previous estimate of three.
Higher interest rates usually encourage foreign investors to take advantage of the higher yields on bonds and time deposits, thereby increasing demand for the US dollar.
The Bloomberg Dollar Spot Index (BBDXY), which tracks the movement of the US dollar against ten major currencies, has risen around 2% in the last five days. Meanwhile, since the beginning of this year BBDXY has risen 5%.
According to BBDXY, the US Dollar Index score was at 106.34, up from 105.28 five days earlier. This indicates that the US dollar has strengthened against nine other currencies, including the euro, British pound sterling and Japanese yen.
Meanwhile, CoinMarketCap data shows Bitcoin has experienced a 9% price decline over the last five days to US$63,936 (Rp. 1.02 billion). While not necessarily correlated, Bitcoin and the dollar have demonstrated an inverse relationship over the years.
Reuters reports, US Federal Reserve Governor Jerome Powell said the country’s inflation rate – currently 3.5% – is not moving towards the central bank’s 2% target. This means the Fed will take longer than expected to cut its benchmark interest rate.
CoinTelegraph quotes trader Justin Spittler’s post on X on April 16 that whenever the US dollar reaches “overbought levels”, it is quickly followed by a significant Bitcoin correction.
Bitcoin, which is seen as a volatile asset, typically sees a surge in demand when the US dollar weakens.
However, other factors come into play with the Bitcoin halving scheduled to take place in three days, namely April 20, 2024. Halving is a process that reduces the amount of rewards given to miners per block by 50%.
Three days into 2020, Bitcoin dominance – the ratio of Bitcoin’s market capitalization compared to the cumulative market capitalization of all other cryptocurrencies – was 15% higher than current levels.
At that time, the US dollar was 6% weaker at that time compared to its current strength. According to CoinStats, Bitcoin dominance currently stands at 52%.
Meanwhile, the rise in the US dollar over the past five days has also sent crypto market sentiment tracked by the Crypto Fear & Greed Index down 11 points since April 10.