Bitcoin’s sell-off late this week might have had little to do with crypto-specific factors and instead everything to do with the U.S. dollar.
After what’s now becoming a customary weekend decline in crypto prices, bitcoin was actually on the rise through the week, in part as the decline in the U.S. dollar accelerated.
Bitcoin peaked for the week late Wednesday afternoon, just shy of $91,000, as the Fed held rates steady and attention turned to who President Trump might nominate as the next leader of the U.S. central bank.
The peak coincided with a decline in the dollar index (DXY) to a multi-year low of 95.34. All other things being equal, a weaker U.S. dollar is often seen as supportive of asset prices, such as bitcoin, stocks, and commodities.
Even though technicians sounded the alarm that the DXY below 96 meant even deeper declines for the greenback, markets thought otherwise. The dollar began a steady climb, and, alongside, bitcoin began pulling back from that $91,000 level.
The dollar continued strengthening into Thursday, with bitcoin’s losses accelerating throughout the session. Finally, the Thursday evening leak that Kevin Warsh (and his hawkish reputation) was to be nominated as Fed chairman forced another surge higher in the dollar and gap lower in bitcoin, with BTC ultimately bottoming at $81,000.
Bitcoin’s managed to bounce to $83,000 since then, but the dollar has continued to post gains, raising questions about how sustainable the crypto’s rise might be.