Since US President-elect Donald Trump’s convincing election victory two months ago, the dollar has strengthened more than 3% against its peers, matching its trajectory after its previous victory in 2016.
Last time, the DXY index, which measures the value of the currency against a basket of the United States’ major trading partners, peaked in December before declining over the following 12 months, coinciding with the bitcoin bull run. (BTC) in 2017.
The story may be different this time. The index has shown no signs of slowing down and Trump’s economic policies and the Federal Reserve’s actions are likely to support the dollar’s rally.
However, while a strong dollar is considered negative for risk assets, the incoming president has expressed support for bitcoin and the largest cryptocurrency has soared since his election. That rally, which saw it reach multiple all-time highs, may not continue at the same pace, according to Andre Dragosch, head of research at Bitwise in Europe. BTC is currently priced about 10% below the record high of around $108,300 it hit in mid-December.
“The Federal Reserve is caught between a rock and a hard place right now,” Dragosch said in an interview on “.
Trump has promised to impose tariffs on his major trading partners, which has the potential to exacerbate global geopolitical uncertainty, fueling greater demand for the dollar, which is seen as a safe haven in times of unrest.
We are also seeing strong U.S. economic performance compared to other markets, with more than 3% growth in gross domestic product (GDP) and higher-than-expected inflation, keeping inflation rates elevated. federal funds and only two interest rate cuts are forecast for 2025.
The Federal Reserve has “communicated to markets that it will only make two cuts in 2025, significantly fewer than previously anticipated,” Dragosch said. “That’s why the dollar has appreciated and yields have continued to rise. I think that’s what’s also been weighing on BTC. Macro is a headwind right now.”
