Apr 2 2024: In early Asian trading on Tuesday, Bitcoin experienced a sharp decline as the U.S. dollar surged to its highest level in over four months, driven by new economic data. The flagship cryptocurrency dropped over 4% in the last 24 hours, reaching $66,495.8 by 04:49 ET (08:49 GMT), falling below the stable range of $68,000 to $72,000 from the previous week.
The dollar’s strength was highlighted by the dollar index crossing the 105 mark for the first time since mid-November. This rise was fueled by an unexpected increase in the ISM manufacturing PMI figures for March, indicating the first growth in factory activity since September 2022, with a 2.5-point rise to 50.3 from February’s 47.8. This change challenges the possibility of imminent Federal Reserve rate cuts, as key components like new orders also showed growth, and the prices index surged significantly to 55.8% from 52.5%.
As a result, market expectations for Fed rate cuts have adjusted, with swap contracts now forecasting less than 65 basis points in reductions for the year, reducing the likelihood of a rate cut in June to below 50%.
A stronger dollar typically makes assets priced in dollars, like Bitcoin and gold, more expensive and less appealing, potentially reducing demand. Additionally, continued dollar strength can lead to global financial tightening, dampening investor interest in risk assets.
The drop in Bitcoin’s price also impacted other cryptocurrencies like Ethereum, Solana, and Dogecoin, which experienced even sharper declines. This volatility is expected as the halving of Bitcoin emissions approaches later in April. The broader crypto market saw significant liquidations, with over $400 million in long positions liquidated compared to $85 million in short positions, according to Coingecko data.
