Bitcoin briefly hit $20,000 before falling back, and the strong dollar continues to "suppress" the crypto market

In the past 24 hours, the US dollar index took a breather after climbing to its highest level in about 20 years and returned to below the 114 mark, which brought a brief opportunity for risk assets to rebound. Bitcoin once broke through $20,000, hitting its highest level in more than a week. However, as U.S. stocks fell further into a bear market, BTC fell again. Bitcoin terminal data showed that the trading price was about $19,016.21 as of press time, a 24-hour drop of about 1%, and Ethereum also fell by less than 1%.

The dollar index, which tracks the greenback against a basket of currencies, has risen more than 18% this year to its highest level since mid-2002. Bitcoin generally moves inversely to the greenback, so a strong greenback is bad for bitcoin.

In addition to the deterioration of the macro environment caused by the Fed's aggressive rate hikes, the crypto market has been affected by a series of problems such as project closures/bankruptcies. Since mid-June, the trading price of Bitcoin has fluctuated between $18,000 and $25,000, which makes investors cautious about the next price trend.

Bitcoin benefits as pound falls

The strong dollar affects more than just BTC, with the GBP/USD exchange rate hitting an all-time low of $1.03. This, in turn, has triggered a wave of BTC purchases by GBP holders in order to maintain their purchasing power.

According to data provided by James Butterfill , head of research at CoinShares , trading volume for the GBP/BTC pair on Bitstamp and Bitfinex platforms, which typically totals around $70 million per day, surged to $881 million on September 26 — an increase of more than 1,150%.

Charlie Morris, chief investment officer at ByteTree Asset Management, commented: “The dollar is a huge bubble, the [Federal Reserve] is making a huge mistake by over-tightening, and when they reverse, there will be a massive influx of money into Bitcoin and gold.”

Strong Hand Continue to hold

Committed holders haven’t been deterred by the market. The percentage of bitcoin that hasn’t moved in more than a year has remained steady at 68%, according to data compiled by FRNT Financial Inc. The metric is now at its highest level since 2014.

On-chain data suggests that many of those attracted to the price increases in 2020 and 2021 have held on, continuing to invest a large portion of their capital in digital assets. Therefore, while their portfolios have depreciated, these losses have not been realized because they have not sold, which means that these Strong Hands are optimistic about BTC's long-term prospects and believe that market fundamentals are relatively healthy.

The strong dollar continues to "suppress"

Vijay Ayyar, vice president of corporate development and international at cryptocurrency exchange Luno , said the Federal Reserve’s 0.75 percentage point rate hike last week marked a “significant event” for the crypto market. “It was broadly in line with market expectations, so we’ve seen a lot of that sentiment priced in,” Ayyar said.

Interestingly, Bitcoin began to rebound on Monday despite a drop in U.S. stocks, with the S&P 500 closing at its lowest level in 2022, so there are signs that the correlation between cryptocurrencies and stocks may be weakening.

However, it may be too early to conclude that cryptocurrencies have decoupled from traditional markets.

Independent market analyst and Twitter user Crypto Tony warned in a tweet that “the USD has not fully peaked yet.” He said: “The USD has not fully peaked yet, so we are looking for more evidence of USD surge and BTC decline. If you plan to leverage Bitcoin, keep an eye on these two factors.”

Tom DeMark, creator of the stock market inflection point indicator and a well-known technical analyst, said in his report that he has become more pessimistic about the short-term trend of BTC/USD than in July. The analyst said: "Time series indicators show that Bitcoin has not made any progress since the June lows, and its downward price forecast from the short-term highs in August has been revised, and the downside space is now $14,877."