Dollar index closes at 21-year high – what’s next for bitcoin?

The DXY, the dollar index against a basket of other fiat currencies, is up at a 21-year high. With the dollar so strong on the back of the Fed’s promise to hike interest rates, what is to become of the crypto sector?

This week’s CPI print, which will let us know whether inflation is continuing its rampant surge, plus the FOMC meeting, are likely to have a pretty massive bearing on where the bitcoin price might go, and also that of the entire crypto sector.

Market analysts are giving a 100% certainty that the Fed will raise rates by 0.5% (50 basis points) at the FOMC meeting, but Jerome Powell’s assessment of the situation after the meeting will be more keenly watched, as it is here that he can give signals to the market as to the Fed’s future actions.

So what of the macro picture for bitcoin? Things are looking rather bearish as can be imagined given the poor economic outlook and how markets across the globe are on their way down.

For bitcoin to buck the trend and move out of the downward movement it is in, it would have to make a start by taking out the previous high at $47,000. Yes, it continues to make higher highs and higher lows, but this puts it in an upward inclining channel, which is far more likely to break to the downside than up.

If the price falls downward out of the channel, and right now it’s on the brink of doing so, then the next stop for any serious support is at around $34/$35k, and from there, if it doesn’t hold, then it is back down to the all-important support at $29k – last tested back in July of 2021.

The absolute armageddon scenario after this could be a 20% retracement down to around $20k, which would mean testing the high of the December 2017 bull run – quite some retracement, and a time for institutions to be building their future positions.

Whatever happens in the FOMC meeting and to the Consumer Price Inflation figure, if you are holding bitcoin for the next few years, this will probably be seen as a blip, as the bitcoin price is very likely to start trending higher again at some point. 

“If you aren’t putting some wealth into bitcoin, where are you putting it?” might well be a very valid question, as fiat currencies continue their long descent towards zero.

Gold and silver may also well be the answer for some, but over the last ten years bitcoin has outperformed both by many thousands of multiples. With bitcoin now firmly entrenched across the globe, and huge institutional interest, this isn’t likely to change any time soon.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.