Bitcoin experienced a significant decline in early Asian trading as the U.S. dollar surged to its highest level in over four months. The flagship cryptocurrency plummeted by more than 4% within a 24-hour period, landing at $65,174 by 09:10 ET (13:10 GMT). This drop pushed the price of Bitcoin below its previous stable range of $68,000 to $72,000. The surge in the dollar index, which measures the strength of the U.S. dollar against major currencies, crossing the 105 mark for the first time since mid-November, was primarily driven by unexpected positive economic data in the U.S.
The increase in the dollar’s strength was attributed to the significant uptick in the ISM manufacturing PMI figures for March. The report indicated the first rise in factory activity since September 2022, with a 2.5 point increase to 50.3 from the previous month’s 47.8. This development marked the end of 16 months of contraction in the manufacturing sector, challenging the expectations of imminent rate cuts by the Federal Reserve. Key components such as new orders also showed growth, and the prices index witnessed a notable increase to 55.8%.
A stronger dollar typically results in assets priced in dollars, including Bitcoin and gold, becoming more expensive and less appealing to investors. This can potentially lead to a reduction in demand for these assets. The noted surge in the dollar’s value also poses the risk of global financial tightening, dampening investors’ appetite for riskier assets. The decline in Bitcoin price extended to other cryptocurrency altcoins such as Ethereum, Solana, and Dogecoin, with even sharper declines being observed.
The increased volatility in Bitcoin and altcoins was attributed to various factors, including the upcoming halving of Bitcoin emissions and the anticipation surrounding the approval of a Bitcoin ETF in January. The broader cryptocurrency market experienced significant liquidations during this period, with over $400 million in long positions being liquidated compared to $85 million in short positions. Despite these fluctuations, experts remain optimistic about the long-term prospects of crypto adoption.
Today’s pullback in the cryptocurrency market is believed to be a result of profit-taking by holders who aim to capitalize on the market’s highs. Kristian Haralampiev, Structured Products Lead at Nexo, emphasized the importance of cashing in at the peak of the market for every investor. The total cryptocurrency market cap saw a 5.3% decrease during this period, highlighting the impact of the dollar’s surge on the overall market sentiment.
The recent surge in the U.S. dollar’s value has had a significant impact on the cryptocurrency market, particularly on Bitcoin and altcoins. The interplay between economic data, market sentiment, and investor behaviors continues to shape the volatility and trends in the cryptocurrency space. As market participants navigate these fluctuations, it is essential to assess the broader market dynamics and make informed decisions based on the evolving landscape of digital assets.