In a post shared via market observers, including those of the world. cryptosphere, listen with interest.
How the Dollar Wrecking Ball is Affecting the Crypto Market
According to Bittel, the “dollar wrecking ball” has grown to impressive scale over the past two months, putting significant pressure on global liquidity and dampening economic surprises in the United States. While the crypto market is no stranger to macroeconomic turmoil, Bittel’s view suggests relief may be on the horizon. “The dollar wrecking ball is in full swing here,” Bittel wrote, referring to the greenback’s sharp rise over the past 15 weeks.
He maintains that this increase has “significantly tightened financial conditions,” triggering a ripple effect that is beginning to be felt in U.S. economic data. In his words: “This abrupt decision is already having adverse consequences for US economic surprises – something I presented as a base case in the GMI and MIT reports in the fourth quarter of last year. »
Bittel notes that economic surprises have eased since the November peak, and he believes this is precisely the delayed reaction one might expect after such a sharp tightening in financial conditions. This development, crucial for market participants including crypto investors, could alter the Federal Reserve’s policy trajectory 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 begin easing rates further soon – despite the dominant narrative circulating in favor of zero cuts in 2025 and forward curve that currently values rates at just 28 basis points for the entire year,” says Bittel.
While the prevailing consensus expects minimal rate cuts this year, Bittel points to early signs that conditions for policy easing are already taking shape. He said the Fed may find itself forced to intervene once weaker U.S. economic data becomes too obvious to ignore.
“Now, with the lag effect taking hold, weaker economic surprises are emerging, and as these continue to deteriorate, the Fed will have no choice but to respond. When that happens, we will likely see dollar strength finally capped and the pressure from rising yields begin to ease,” says Bittel.
From a crypto perspective, a possible move away from the squeeze could prove significant. Historically, risk assets, including Bitcoin and other cryptocurrencies, have responded positively to accommodative monetary policy and an environment in which cash flows more freely. If dollar dominance does indeed reach and recede, it could ease the liquidity crisis that has weighed on cryptocurrency prices in recent months.
Bittel also drew attention to the psychological dimension of these macro-events. As he said: “This will then help to alleviate the liquidity crisis that has been building up, giving risky assets the breathing room they need to recover again. Bad news = good news…”
Remarkably, DXY could follow a similar path to Donald Trump’s first term as President of the United States. In 2017, calling the dollar “too strong,” his policies caused a sharp decline in the DXY, sparking a fabulous rally for the Bitcoin and crypto market, as Bittel explained in a previous analysis.
At press time, BTC was trading at $96,228.
Featured image created with DALL.E, chart from TradingView.com
