Bitfinex predicts that the price of Bitcoin will rise as the value of the US Dollar declines

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Bitfinex predicts that the price of Bitcoin will rise as the value of the US Dollar declines – The anticipated surge in Bitcoin (BTC) prices is likely to be influenced by the US Dollar Index (DXY), a measure of the US dollar’s worth against various global currencies. The DXY has recently experienced a decline of 1.1 percent, following its six-month peak on May 1. Experts at Bitfinex suggest that this downward trend is favorable for Bitcoin’s performance in the latter half of 2024.

Over time, Bitcoin and the DXY have consistently exhibited a strong inverse relationship, indicating that a drop in the DXY often corresponds with a rise in Bitcoin’s value.

Bitfinex

FOMC Policy and Its Impact

Following the recent Federal Open Market Committee (FOMC) meeting, the DXY experienced a 1.85 percent decline until May 3, before slightly rebounding to 105.32 at the time of this study. The DXY’s fluctuations are primarily linked to the dovish stance of the FOMC, hinting at a potential interest rate cut in the near future.

Moreover, the release of Non-Farm Payroll data during the same period highlighted a deteriorating labor market. This report, which showed fewer new jobs created than anticipated, contributed to the drop in the US dollar.

Consequently, this situation has boosted the performance of various risk assets, such as Bitcoin and US equities markets. Investors often keep a close eye on the correlation between weak employment figures and the performance of risk assets.

The decelerating economy and fluctuating interest rates

The underperformance of employment growth has sparked worries about a potential economic decline. As a result, there is a likelihood that the Federal Reserve will consider reducing interest rates. This decrease in rates, or even the anticipation of it, typically results in decreased investment returns in US dollars, thereby reducing the attractiveness of the currency. Consequently, this could further contribute to the deterioration of the DXY.

Bitcoin Optimistic Outlook

The unfolding of this situation sets the stage for a weaker dollar and potentially increased Bitcoin values in the upcoming months. Analysts at Bitfinex are hopeful, foreseeing a very favorable outlook for Bitcoin during the third and fourth quarters of this year. Nevertheless, they highlighted that short-term market uncertainty is expected to prevail, leading to a period of low volatility until the Federal Reserve initiates the reversal of its quantitative tightening (QT) measures in June.

Bitcoin’s Post-Halving Period of Accumulation

The consideration of the post-halving stage in the Bitcoin cycle is of utmost importance. As noted by trader Rekt Capital, the current Bitcoin price is currently in a phase of accumulation after the halving, similar to previous cycles.

Rekt Capital expressed in a tweet that Bitcoin will experience a significant retracement, enough to make one believe that the bull market has come to an end, only to then resume its upward trend.

During this period, Bitcoin often experiences substantial drops, which can shake the confidence of investors who may have thought that the bullish cycle had concluded. However, Bitcoin continues its upward trajectory despite these setbacks.

This cycle of decline and recovery not only tests the resilience of long-term investors but also provides an opportunity for new investors to enter the market at lower prices.

The anticipation of quantitative tightening (QT) contraction, along with the potential impacts of ongoing economic uncertainty, can influence market movements.

Bitcoin investors and experts find the fluctuations in the DXY (dollar index) particularly intriguing. A weakening dollar often leads to a shift in investor preferences towards alternative assets, including cryptocurrencies like Bitcoin.

As the dollar loses strength, Bitcoin becomes more attractive, especially as a hedge against inflation and currency devaluation.

Moreover, the global economic landscape significantly affects the trajectory of both the dollar and Bitcoin. Geopolitical concerns, trade negotiations, and changes in foreign policies all have the potential to impact market sentiment and currency strength. Let us closely observe these developments.

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