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Bitcoin’s late-week sell-off appears to have been driven less by crypto-specific developments and more by renewed strength in the U.S. dollar, highlighting the growing macroeconomic influence on digital asset prices. After a familiar weekend dip, bitcoin had actually been trending higher earlier in the week, supported by a sharp decline in the U.S. dollar index (DXY), which often moves inversely to risk assets like cryptocurrencies, equities, and commodities.
During the middle of the week, bitcoin prices climbed steadily and peaked just under $91,000 late Wednesday. This rally coincided with the Federal Reserve’s decision to hold interest rates steady and increased market speculation around President Trump’s potential nominee for the next Fed chair. At the same time, the dollar index fell to a multi-year low of 95.34, reinforcing bullish sentiment across risk-on assets, including bitcoin.
However, sentiment shifted quickly. While some technical analysts warned that a DXY break below 96 could signal deeper dollar weakness, the market instead saw a reversal. The U.S. dollar began to strengthen, and bitcoin prices started to retreat from their weekly highs. As the dollar’s rebound gained momentum, bitcoin’s pullback accelerated, underscoring the sensitivity of BTC price action to foreign exchange movements.
The situation intensified Thursday evening following reports that Kevin Warsh, known for his hawkish stance on monetary policy, was emerging as a leading candidate for Fed chair. This news sparked another surge in the dollar and triggered a sharp drop in bitcoin, which briefly fell to around $81,000. Although BTC has since rebounded modestly to the $83,000 range, the continued strength of the U.S. dollar has raised questions about the sustainability of any near-term crypto recovery.
Overall, bitcoin’s recent price action suggests that broader macroeconomic forces, particularly U.S. dollar strength and Federal Reserve expectations, are playing a decisive role. For investors watching bitcoin price trends, monitoring the dollar index and monetary policy signals may be just as important as tracking crypto-specific news.
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