Rising Dollar Puts Pressure on Bitcoin Price

The dollar is strengthening, and that is not a good sign for Bitcoin. After the DXY fell to 95 earlier this year, its lowest level since 2022, the dollar index is now climbing back above 100 with a weekly close above the 200-day EMA. Bitcoin is currently at $59.9K, down 1.4% over the past 24 hours.

Bitcoin is available at OKX and Bybit.

What is the DXY and why does it matter for Bitcoin?

The DXY is a measure of the dollar’s dominance in the global monetary system. When the dollar strengthens, debt becomes more expensive and harder to repay, tightening financial conditions worldwide. This acts as a brake on risky investments such as Bitcoin.

Analyst Darkfost points to the historical pattern visible in his chart: periods when the DXY trades above its 365-day moving average almost always coincide with disappointing Bitcoin performance. The relationship between the two is turbulent and often inverse. When the dollar rises, Bitcoin comes under pressure.

Historical periods show a clear pattern

Darkfost’s chart marks periods when the DXY is above or below its 365-day average. Looking at historical data, it is striking that moments of dollar strength consistently go hand in hand with less favourable conditions for Bitcoin. The current situation, where the DXY has just shot back above 100 with a weekly close above the 200-day EMA, fits that pattern.

According to Darkfost, this indicator is useful as a barometer for the broader financial context around Bitcoin. It provides insight into whether liquidity conditions are favourable or not at any given time. A strong dollar typically points to a tighter monetary climate, making it harder for risky assets such as the Bitcoin price to rise.