Bitcoin's price has dropped in anticipation of its April 20 halving and the Fed's anticipated rate-cut pause in May as the US dollar gains momentum.
While Bitcoin BTC has decreased during that period due to instability in the cryptocurrency ahead of its April 20 halving and the expectation that interest rates would remain high, the US dollar is poised for its "best 5-day run" since February 2023.
The Kobeissi Letter, a trading resource, states that predictions of consistently rising interest rates are probably what are driving the dollar's gain.
The markets were expecting the Fed to begin tapering in June, less than a month ago. The Kobeissi Letter stated in an April 17 X article that "Higher for longer is now the base case."
The demand for the dollar rises when interest rates rise because international investors are usually more inclined to take advantage of higher yields on bonds and term deposits.
Over the past five trading days, the Bloomberg Dollar Spot Index (BBDXY), which measures the performance of a basket of ten major international currencies relative to the US dollar, has increased by around 2%, marking the highest increase in 14 months.
The U.S. dollar index score, as reported by the BBDXY, is 106.34, up from 105.28 five days ago. This suggests that the dollar has gained strength in relation to the other nine currencies in the index, such as the euro, pound, and Japanese yen.
CoinMarketCap statistics shows that over the last five days, the price of Bitcoin has dropped by 9%, to $63,936.
Over time, there has been an inverse relationship between Bitcoin and the dollar, albeit not necessarily one.
It's "likely to take longer than expected to achieve that confidence," according to Federal Reserve Chair Jerome Powell, because the nation's inflation rate, which is currently 3.5%, is not approaching the central bank's 2% target.
Trader Justin Spittler, meanwhile, issued a warning in an April 16 X post, stating that every time the US currency has hit "overbought levels," there has been a rapid and notable correction.
As the value of the dollar declines, demand for bitcoin, which is thought to be a more volatile asset, typically soars.
But there's still another aspect to consider: the Bitcoin halving, which is set for April 20 and takes effect in just three days, will cut the amount of BTC that can be mined every block by 50%.
Based on Bitcoin's dominance chart, even if this is halving, investors are more confident in riskier crypto assets than they were in the 2020 halving event.
The ratio of Bitcoin's market capitalization to the total market capitalization of all other cryptocurrencies, or Bitcoin dominance, was 15% higher three days prior to the 2020 halving.
In comparison to its current strength, the value of the US dollar was 6% lower at the time.
The Crypto Fear and Greed Index, which measures sentiment in the cryptocurrency market, has decreased by 11 points since April 10 as a result of the U.S. dollar's five-day surge.
April 2024, Cryptoniteuae