In one after shared via , people listen with interest.
How the dollar wrecking ball is impacting the crypto market
According to Bittel, the “dollar wrecking ball” has gained impressive momentum in recent months, putting significant pressure on global liquidity and dampening economic surprises in the United States. While the crypto market is not unknown macro-driven turbulenceBittel’s perspective suggests that relief may be on the horizon. “The dollar running ball is in full swing here,” Bittel wrote, referring to the sharp rise in the dollar over the past fifteen weeks.
He claims the surge has “tremendously tightened financial conditions,” creating a ripple effect that is beginning to manifest in U.S. economic data. In his words: “This sharp move is already taking its toll on economic surprises in the US – something I outlined as a base case in the GMI and MIT reports from the fourth quarter of last year.”
Bittel notes that economic surprises have diminished since the November peak, and he believes this is exactly the delayed reaction you would expect after such a strong tightening of financial conditions. Critically important for market participants, including crypto investors, this development could change the Federal Reserve’s policy trajectory sooner than some expect.
“Here’s the most important thing: this setup is exactly what I think will pave the way for the Fed to intervene and start easing rates further soon – despite the prevailing narrative of zero cuts in 2025 and the forward curve currently pricing just 28 basis points for the full year,” Bittel claims.
While the mainstream consensus expects minimal interest rate cuts this year, Bittel points to the first signs that conditions ripe for policy easing are already taking shape. According to him, the Fed may be forced to intervene if it becomes weaker US economic data becomes too obvious to ignore.
“As the slowdown effect takes hold, weaker economic surprises emerge, and as these continue to deteriorate, the Fed will have no choice but to respond. When that happens, we will likely see the dollar’s strength finally capped and the pressure from rising interest rates begin to ease,” Bittel explains.
From a crypto perspective, a potential shift away from tightening could prove significant. Historically, risky assets – including Bitcoin and other cryptocurrencies – have responded positively to accommodative monetary policy and an environment where liquidity flows more freely. If the dollar’s dominance does indeed wax and wane, it could ease the liquidity crisis that has weighed on crypto prices in recent months.
Bittel also drew attention to the psychological dimension of these macro events. As he put it: “This will help alleviate the growing liquidity crisis, giving risky assets the breathing space they need to bounce back. Bad news = good news…”
Remarkably, the DXY could follow a similar trajectory to Donald Trump’s first term as US president. In 2017, he called the dollar “too strong” and his policies caused the DXY to fall sharply, sparking a fantastic rally for the Bitcoin and crypto markets. discussed in an earlier analysis.
At the time of writing, BTC was trading at $96,228.
Featured image created with DALL.E, chart from TradingView.com