Crypto Faces The ‘Dollar Wrecking Ball’: What This Means

Crypto Faces The ‘Dollar Wrecking Ball’: What This Means

In a mail Shared via Encrypted, they listen intently.

How the Dollar Wrecking Ball Affects the Cryptocurrency Market

According to Bittle, the “dollar wrecking ball” has gained impressive momentum over the past two months, putting significant pressure on global liquidity and dampening economic surprises in the United States. While the cryptocurrency market is no stranger to macroeconomic-driven turmoil, Bittel’s view suggests relief may be on the horizon. “The dollar wrecking ball is in full swing here,” Bittle wrote, referring to the sharp rise the US currency has seen over the past 15 weeks.

He asserts that the rise led to a “significant tightening of financial conditions,” which led to a ripple effect that began to be recorded in American economic data. As he put it: “This sharp move is already affecting US economic surprises – something I identified as a base case in GMI and MIT reports in the fourth quarter of last year.”

Beitel notes that economic surprises have subsided since the peak in November, and he believes this is precisely the delayed reaction one would expect after such a strong tightening in financial conditions. Crucially for market participants, including cryptocurrency investors, this development could change the course of Federal Reserve policy sooner than some expect.

“Here’s the important part: This setup is exactly what I believe will pave the way for the Fed to step in and start easing interest rates further soon — despite the prevailing narrative of zero cuts in 2025 and a forward curve currently priced at just $28. basis point for the full year,” claims Bittel.

While the prevailing consensus expects minimal interest rate cuts this year, Beitel highlights early signs that the conditions for monetary policy easing are already taking shape. According to him, the Fed may find itself forced to intervene once weaker US economic data becomes too evident to ignore.

“Now, as the lag kicks in, weaker economic surprises are beginning to emerge, and as those surprises continue to worsen, the Fed will have no choice but to respond. When that happens, we will likely see the dollar’s ​​strength finally stall and the pressure from rising yields begin to take hold.” Back off,” explains Bittel.

From a crypto perspective, a potential shift away from tightening could be significant. Historically, risk assets – including Bitcoin and other cryptocurrencies – have responded positively to accommodative monetary policy and an environment in which liquidity flows more freely. If the dollar’s dominance does indeed peak and recede, this could ease the liquidity pressure that has weighed on cryptocurrency prices in recent months.

Bittle also drew attention to the psychological dimension of these macro-events. As he put it: “This will then help ease the accumulated liquidity crunch, giving risky assets the breathing room they need to rise again. Bad news = good news…”

Interestingly, the US dollar index may take a path similar to the one it followed in Donald Trump’s first term as President of the United States. In 2017, the dollar was described as “very strong,” and its policies caused a sharp decline in the value of DXY, which led to a fantastic rally in the Bitcoin and cryptocurrency market, Bittel said. It was discussed in a previous analysis.

At press time, Bitcoin was trading at $96,228.

Bitcoin is recovering back above $96,000, on the four-hour chart source: BTCUSDT on TradingView.com

Featured image created with DALL.E, a chart from TradingView.com

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