As Bitcoin approaches the $100,000 mark, experts are warning that a stronger U.S. dollar could hinder its growth.
André Dragosch, Head of European Research at Bitwise, pointed out that Bitcoin has historically faced difficulties during periods of dollar strength, which indicates tighter global liquidity. The U.S. Dollar Index has recently risen, and Bitwise’s models now suggest that the dollar is the primary factor influencing Bitcoin’s performance.
Furthermore, the U.S. Federal Reserve’s monetary policy is supporting the dollar, diminishing expectations of interest rate cuts in 2024.
This creates a less favorable environment for Bitcoin, as it thrives in more liquid conditions. Global developments, such as potential interest rate hikes by the Bank of Japan, could further exert pressure on Bitcoin by unwinding the yen carry trade.
In light of rising inflation in Japan and the BOJ’s indication of a tighter policy, the global trend towards tightening could pose challenges to Bitcoin’s climb to $100,000 in the short term. Analysts suggest that although Bitcoin remains resilient, its performance in the near future will depend on how central banks worldwide manage liquidity.
If the dollar continues to strengthen and other global central banks follow suit, Bitcoin’s journey to new highs may be delayed as investors shift towards more traditional assets perceived as safer in a tightening environment.