February 3 News, just as Bitcoin attempts to stabilize after a decline, the US dollar index suddenly strengthens, becoming an important macro variable suppressing the crypto market. The US dollar index (DXY), which tracks the performance of the US dollar against major fiat currencies, rose about 1.5% in two days to 97.60, marking the largest two-day gain in nine months and putting short-term Bitcoin rebound prospects under further pressure.
In the past 24 hours, Bitcoin selling has noticeably slowed, with prices fluctuating between $75,000 and $80,000. Previously, BTC briefly dropped from $85,000 over the weekend to below $75,000. Some market participants had hoped for a rebound driven by the return of derivative funds above $80,000, but the sudden strength of the dollar has posed new challenges to the sustainability of the rally.
From a macro perspective, a stronger dollar generally raises the opportunity cost of holding dollar-denominated assets, including Bitcoin, gold, and commodities. At the same time, an upward move in DXY often accompanies tightening global liquidity, rising funding and credit costs, and suppressed market risk appetite, exerting systemic pressure on crypto assets.
This round of dollar rebound is widely believed to be related to market expectations of changes regarding the new Federal Reserve Chair. US President Trump has nominated Kevin Warsh to serve as Fed Chair. Known for his hawkish policy stance during his tenure as a Fed Governor from 2006 to 2011, investors generally believe he will not quickly shift toward aggressive easing.
ING, in its latest report, pointed out that with Warsh’s nomination, market sentiment regarding the continued devaluation of the dollar is fading, and the dollar’s resilience is re-emerging.
Meanwhile, upcoming US macroeconomic data may continue to strengthen the dollar. Markets expect the latest US non-farm payrolls to show about 80,000 new jobs added, with the unemployment rate remaining at 4.4%. If the data performs steadily, the dollar could continue to rebound, further squeezing Bitcoin.
Matthew Ryan, Chief Market Strategist at FXStreet, said that there is still room for the dollar to rise. Although Warsh has recently signaled support for rate cuts alongside Trump, his past policy style tends to be cautious and hawkish, which means the pace of monetary easing may be slower than market expectations.
Against the backdrop of a strong dollar and macroeconomic uncertainties, Bitcoin’s rebound window is narrowing, and the crypto market is likely to remain highly volatile in the short term.
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