According to analyst James Van Straten, the ongoing strength of the US dollar may present challenges for Bitcoin (BTC) in the upcoming months. Following US President-elect Donald Trump’s resounding election victory two months ago, the dollar has appreciated by over 3% against a range of global currencies, reflecting a similar trend observed after Trump’s previous win in 2016.
In December 2016, the U.S. Dollar Index (DXY), which assesses the currency’s worth relative to its primary trading counterparts, reached a peak and subsequently declined over the ensuing year. This timeframe coincided with Bitcoin’s surge in 2017. Nonetheless, Van Straten proposes that this cycle could diverge. The DXY exhibits no indications of abating, and the economic policies advocated by Trump, in conjunction with the Federal Reserve’s monetary measures, might sustain the dollar’s ascent.
Although a robust dollar typically exerts pressure on riskier assets, Trump’s vocal backing of Bitcoin has contributed to driving BTC prices higher since his election. BTC recently achieved multiple all-time highs before retracting approximately 10% from its peak of $108,300 in mid-December. Andre Dragosch, Bitwise’s research head in Europe, anticipates potential obstacles for this rally.
In light of Trump’s proposed tariffs on significant trading partners, there could be a rise in geopolitical uncertainty, amplifying the demand for the safe-haven dollar. This situation is compounded by a resilient US economic performance characterized by GDP growth surpassing 3% and elevated inflation levels that sustain high interest rates. The Federal Reserve has indicated intentions for only two rate reductions by 2025, significantly fewer than previously anticipated.
Dragosch expressed, “The Federal Reserve finds itself in a dilemma. They are confronted with the dilemma of either acting belatedly and risking a recession in the US, or encountering a resurgence in inflation.” He further remarked, “The Federal Reserve has informed the markets of its plan to implement merely two rate reductions by 2025, a figure well below expectations. Consequently, the dollar is appreciating, and yields are persistently climbing. This macroeconomic backdrop poses challenges for BTC.”
*This translation does not constitute investment advice.
