In Asian trading on Friday, the price of Bitcoin experienced weakening as the dollar rebounded sharply to three-week highs, resulting in the world’s largest cryptocurrency hovering around the $66,000 mark.
As of 01:20 ET (05:20 GMT), Bitcoin traded down by 1.4% at $66,082.0. Despite consolidating from record highs observed over the past week, the cryptocurrency managed to maintain stability above its weekly lows.
The primary source of pressure on crypto markets stemmed from the strength exhibited by the dollar. The unexpected interest rate cut from the Swiss National Bank and dovish signals from the Bank of England led traders to favor the greenback, considering it as one of the few high-yielding, low-risk currencies. Consequently, the dollar index surged to a three-week high, surpassing 104 points.
Bitcoin now faces the prospect of a weekly loss amid the prevailing strength of the dollar and sustained profit-taking activities. The cryptocurrency is trading approximately 5% lower than its levels from the previous Friday.
Last week, Bitcoin surged to record highs exceeding $73,000, benefiting from substantial capital inflows into recently approved spot exchange-traded funds in U.S. markets. These funds have been a crucial support for Bitcoin in 2024, with the cryptocurrency trading up around 50% for the year.
Despite the recent highs, Bitcoin remains comfortably above the lows experienced during the week, when it briefly dropped to $60,000 amid anticipation of a Federal Reserve meeting.
However, the near-term outlook for Bitcoin appears uncertain due to the strength of the dollar. Resilience in the U.S. economy, compared to its counterparts in the developed world, has made the greenback particularly appealing. Moreover, the Federal Reserve may lag behind most central banks in terms of interest rate cuts.
Nevertheless, the Fed’s outlook for at least three interest rate cuts in 2024 suggests a potential decline in the dollar over time. Market expectations still anticipate a 25 basis point cut in June, according to the CME Fedwatch tool. Such a scenario is favorable for Bitcoin, as its speculative nature tends to thrive in a low-rate environment.
Furthermore, the upcoming halving event, expected to reduce the generation of new Bitcoin by 50%, could contribute to price increases in 2024. The halving is projected to occur by April.