Dollar Index Nears Breakout as Bitcoin Remains Under Pressure
The dollar is nearing a major breakout while Bitcoin keeps sliding. A stronger DXY could add more pressure to the crypto market in the coming days.
Key Takeaways
- Bitcoin is falling for the third straight day and is trading around $63,900, while the broader crypto market is also under pressure.
- The Dollar Index is rising to 100.66 and is nearing a breakout from a 13-month sideways range, which usually puts pressure on Bitcoin.
- Analysts point to $62,258 as the key 200-week moving average; European investors should also keep an eye on Fed policy and DXY.
Bitcoin is under pressure as the Dollar Index (DXY) is on the verge of a major breakout. The largest cryptocurrency is down for the third day in a row and is trading around $63,900 (€55,100), nearly 1% lower since midnight UTC. The broader crypto market is following a similar pattern, except for a few tokens like HASH, XLM, and ENA, which are up 7% or more.
Dollar Index and Its Impact on the Crypto Market
The Dollar Index, which measures the value of the U.S. dollar against six major currencies, including the euro and the Japanese yen, rose 0.26% to 100.66, building on Wednesday's 0.8% gain. The index is close to breaking out of a 13-month sideways range, a level where buyers and sellers have been roughly balanced for a long time.
A move above this level could trigger more buying in the dollar, which usually puts pressure on dollar-denominated assets like Bitcoin. Historically, Bitcoin and the Dollar Index move in opposite directions, and the recent 90-day correlation was about -0.82. That means a stronger dollar often lines up with lower Bitcoin prices.
Impact of Fed Policy and Technical Levels
The recent hawkish tone from the Federal Reserve, which has raised concerns about possible interest rate hikes, is adding to the dollar's strength. If the Dollar Index keeps climbing, Bitcoin could stay under pressure and may fall back toward the key 200-week moving average around $62,258 (€53,700).
Analysts at crypto exchange Kraken note that a drop below this level has often led to strong medium-term returns in the past, with a median gain of more than 100% within one to three years. At the same time, other experts warn of a possible deeper correction if this technical level breaks.
Why This Matters for European Crypto Investors
For European investors, it's important to keep an eye on the Dollar Index and Fed policy, since a stronger dollar can affect the price of Bitcoin and other cryptocurrencies. The makeup of the DXY, with the euro carrying a big weight, also means European economic conditions and European Central Bank policy can indirectly affect dollar strength and, in turn, the crypto market.
A breakout in the Dollar Index could therefore be a sign of higher volatility and price pressure in the crypto market, which may matter for risk management and trading strategies in Europe. That fits into the broader macro pressure also showing up in the bond market, where higher rates and a tighter Fed stance put extra pressure on Bitcoin.
