The US dollar has risen to a two-month high, raising new risks for Bitcoin (BTC) as markets increasingly price in an interest rate hike by the Federal Reserve later this year.
Stronger-than-expected US jobs data lifted the US currency and pushed investors towards cash and bonds. This shift leaves high-risk assets like cryptocurrencies facing a sharp rally in the near term.
Strong jobs data supports the dollar
BeInCrypto reported that the non-agricultural sector in the United States Payrolls rose by 172,000 jobs in May, significantly exceeding market expectations. Stronger-than-expected jobs data indicates continued labor market resilience despite rising energy costs.
Following the release, the US Dollar Index (DXY) closed above 100 for the first time in two months. The rally extended into Monday, with the index rising to an intraday high of 100.174, its strongest level since April 6. At the time of writing, the DXY was trading at 100.016.
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Traders quickly adjusted their expectations after the payroll report. According to CME FedWatch DataMarkets now Pricing at over There is a 70% chance of a rate hike by the Fed in December, up from 45% the week before.
Why is a strong dollar putting pressure on Bitcoin?
The rise of the US dollar has historically presented challenges for Bitcoin and other risky assets. When the dollar rises, investors often shift their capital toward safer, yield-generating assets, reducing demand for speculative investments such as cryptocurrencies.
BeInCrypto has already done this Report on the inverse relationship Which appears frequently between DXY and Bitcoin. It is worth noting that veteran financial trader Matthew Dixon believes that the dollar index is at a pivotal level. He argues that the move could spread across Bitcoin and altcoins.
“The inverse relationship is not perfect, but it is very strong over several months. We are currently at a ‘make or break’ point on DXY in the long term which will likely have a serious impact on BTC and ALTs.” He said.
This comes as Bitcoin continues to face extreme volatility. Cryptocurrency briefly rises 5% To restore the $63,000 level earlier Monday as geopolitical tensions in the Middle East fueled market volatility. However, the rally was short-lived, as Bitcoin gave up most of its gains to trade at $62,615 at press time.
Investors are now turning their attention to the monetary policy meeting that the Federal Reserve will hold in mid-June, chaired by Kevin Warsh. Any hawkish signals that interest rates will rise for a longer period could provide further support to the dollar, which could create additional headwinds for Bitcoin and the broader cryptocurrency market.
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this post Dollar strength returns as the biggest near-term headwind for cryptocurrencies appeared first on BeInCrypto.
