On January 14th, as posted by X, Julien Bittel, Chief of Macro Research at Global Macro Investor (GMI), expressed a cautionary note regarding the rising dollar and its potential effects on financial circumstances. This warning is resonating with many market analysts, including those in the cryptocurrency field, who are listening attentively.
How The Dollar Wrecking Ball Affects The Crypto Market
As an analyst, I’ve been observing a noteworthy surge in what Bittel refers to as the “dollar wrecking ball” during the last few months. This powerful force has been putting considerable strain on global liquidity and, more specifically, dampening unexpectedly positive economic indicators in the United States. The crypto market, accustomed to turbulence driven by macroeconomic factors, seems to be bracing for this trend. However, Bittel’s analysis suggests a potential respite might be approaching. His recent statement, “dollar wrecking ball in full swing here,” reflects his observation of the U.S. dollar‘s sharp increase over the past 15 weeks.
He thinks this sudden change is already negatively impacting U.S. economic indicators – a scenario I predicted could happen in the GMI and MIT reports from the last quarter of the previous year.
Bittel points out that economic shocks have lessened since their peak in November, which he thinks is exactly the response one would expect following such a strong tightening of financial conditions. Importantly for market participants like crypto investors, this trend might cause the Federal Reserve to adjust its policy course earlier than some predict.
According to Bittel, here’s the key point: This arrangement seems to be the one that he thinks will lead the Federal Reserve to lower interest rates more, quite soon – even though there’s a widely held view that they won’t cut at all in 2025 and the current market predictions suggest only a small increase of 28 basis points for the entire year.
Instead of expecting only small interest rate decreases this year as many believe, Bittel points out indications that circumstances could be developing which would necessitate monetary policy easing. He suggests that the Federal Reserve might feel pressured to intervene when it can no longer overlook weakening US economic data.
Currently, due to a lag effect, less favorable economic developments are arising, and as these persist and worsen, the Federal Reserve will be compelled to act. This action is expected to limit the dollar’s strength and alleviate the pressure from increasing yields. This is according to Bittel’s explanation.
As a crypto investor, I’ve noticed that historically, crypto markets have thrived under accommodative monetary policies and when liquidity is abundant. If the trend of tightening monetary policy were to reverse, it could be quite significant for us. Moreover, if the dollar’s dominance were to wane, it might alleviate the liquidity squeeze that has affected crypto prices recently, potentially leading to a positive impact on our investments.
Additionally, Bittel emphasized the psychological aspect of such large-scale occurrences. To explain this, he said: “This will ease the tightening of financial resources, creating a favorable environment for risky investments to recover. In other words, unfavorable information could lead to positive outcomes…
As a crypto investor, it’s fascinating to consider that the DXY might mirror Donald Trump’s first term as U.S. President. Back in 2017, I remember him labeling the dollar as “too strong.” His subsequent policies led to a steep decline in the DXY, which, as Bittel pointed out in his previous analysis, sparked an incredible rally for Bitcoin and the crypto market at large. It’s intriguing to ponder what such a trend could mean for us investors today.
At press time, BTC traded at $96,228.
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2025-01-15 07:41