Cathie Wood Sees a Stronger Dollar, Bitcoin Under Pressure
ARK CEO Cathie Wood points to a broader dollar index that has been rising for years. That could put the Fed, gold, and Bitcoin under pressure again.
Key Takeaways
- Cathie Wood expects the U.S. dollar to get stronger over the next few years than many investors think.
- A stronger dollar could put pressure on gold and Bitcoin and tighten financial conditions.
- Bitcoin rose 6.14% in September despite a rising DXY, while gold fell from $5,602 to about $4,140.
ARK Invest CEO Cathie Wood warns that the U.S. dollar could become much stronger over the next few years than many investors expect. According to her, that could put pressure on gold, change the picture for bonds, and test Bitcoin's recent sharp rise.
A Different Dollar Than DXY
Wood says many traders mainly look at the U.S. Dollar Index, or DXY. It measures the dollar against six major currencies, but according to ARK, that view is outdated. The broader index from the Federal Reserve tracks 26 countries and is reweighted every year.
On that measure, the dollar has risen 36% since August 2008 and is now 44% above its long-term average, Wood says. According to her, the dollar has therefore not been weak at all against the currencies of trading partners.
Rates and Policy Remain Key
Wood ties her view to tax incentives that push companies to invest again in U.S. factories and data centers. She also expects Fed Chair Kevin Warsh to keep a tight monetary policy in place. According to her, that fits a situation where the dollar could keep climbing.
The broader backdrop matters for crypto because a stronger dollar can tighten financial conditions. That can make both gold and Bitcoin more expensive for foreign buyers, while alternative investments become less attractive. The Federal Reserve still plays a key role here, because rate hikes and the outlook for tighter policy often feed directly into the dollar.
Bitcoin and Gold as the Test
For Bitcoin, that is especially relevant. Historically, BTC has often struggled when the dollar gets stronger, but in September the coin rose 6.14% while the DXY also moved higher. That makes the current period interesting for investors who want to see whether Bitcoin behaves differently than in earlier dollar cycles.
Gold is an even bigger test of Wood's thesis, according to her. The gold price has already fallen from the record of $5,602 (€4,990) in January to about $4,140 (€3,690). Morgan Stanley analyst Amy Gower still sees $4,000 (€3,560) as an important support level, partly because of central bank buying. If the dollar keeps strengthening, that could make the comparison between gold and Bitcoin even sharper again.
Bitcoin's reaction to macroeconomic data also remains important here. Weak U.S. jobs data recently showed how quickly the coin can move when the market adjusts its rate expectations.
