The recent surge in the U.S. dollar to its highest level in over four months has had a profound impact on the cryptocurrency market, particularly on Bitcoin. In early Asian trading, Bitcoin saw a significant drop of more than 4% in the past 24 hours, plummeting to $65,174. This downward movement pushed the price of Bitcoin below the stable range it had maintained the previous week, which was between $68,000 to $72,000.
The dollar index, which measures the strength of the U.S. dollar against a basket of major currencies, surpassed the 105 mark for the first time since mid-November. This spike was fueled by an unexpected increase in the ISM manufacturing PMI figures for March, indicating growth in factory activity for the first time since September. As a result, market expectations for Federal Reserve rate cuts have dwindled, with swap contracts now projecting less than 65 basis points in reductions for the year.
A stronger dollar typically makes assets priced in dollars, such as Bitcoin and gold, more expensive and less appealing to investors. This reduction in demand poses a significant challenge to the cryptocurrency market, as it can lead to global financial tightening and a decrease in appetite for risk assets. The recent surge in the dollar’s strength can be attributed to a less dovish speech by Federal Reserve’s Christopher Waller, further exacerbating the downward pressure on Bitcoin and other cryptocurrencies.
Altcoins Follow Bitcoin’s Lead
The impact of the strong dollar was not limited to Bitcoin alone, as altcoins such as Ethereum, Solana, and Dogecoin also experienced sharp declines. Ethereum and Cardano’s ADA each slid more than 5% in the past 24 hours, while Solana’s SOL and Dogecoin tumbled over 7.8% and 10%, respectively. The broader crypto market faced significant liquidations, with over $400 million in long positions being liquidated, compared to $85 million in short positions.
Despite the recent pullback in the cryptocurrency market, Ken Timsit of Cronos Labs remains optimistic about the future of crypto adoption. He noted that while automated trades and derivatives may trigger temporary sell-offs, the overall outlook for crypto remains positive. The total crypto market cap fell around 5.3% during the same period, totaling $2.62 trillion according to Coingecko data.
Kristian Haralampiev, Structured Products Lead at Nexo, attributed the recent pullback to profit-taking by investors. “Cashing in at the top of the market has to be among every investor’s goals,” he stated. The increased volatility in the crypto market, coupled with the strength of the U.S. dollar, has created a challenging environment for investors. As the market continues to react to economic data and geopolitical events, the future of Bitcoin and altcoins remains uncertain in the face of a strong dollar.