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- Bitcoin often shows an inverse correlation with the dollar. A weaker dollar boosts BTC’s appeal.
- While past trends can provide insight, 2024 has introduced new dynamics.
The recent Bitcoin [BTC] crash from its $108K all-time high to $92K in just three days serves as a stark reminder of the ‘anticipated’ volatility investors expect in 2025.
A key takeaway: the dollar index surged to a yearly high of 108 – a level last seen in July 2022 – despite the Fed easing borrowing rates, reinforcing the perceived ‘risk’ tied to Bitcoin investments.
So, as we move toward 2025, is Bitcoin set to become an even riskier bet as the Federal Reserve speculates or could this be the ideal moment to jump in, knowing the crypto market loves to defy mainstream expectations?
Dollar under the radar
As the third and final FOMC rate cut of 2024 concluded, both stocks and Bitcoin experienced a massive sell-off. In response, the dollar surged to a yearly high.
Typically, Bitcoin and the dollar show an inverse correlation. A higher dollar index suggests investors are shifting towards ‘safe-haven’ assets like bonds and yields, rather than betting on ‘riskier’ assets like Bitcoin.
Interestingly, this pattern mirrors the 2016 market reaction when Trump won his first presidential election. Back then, as the final quarter unfolded, the dollar index spiked to 103, marking a yearly high.
Source : Refinitiv
But the months that followed took a surprising turn. By May, the dollar had erased much of its gains, retreating to pre-election levels. The impact on Bitcoin? It closed 2017 at $13,000, marking a staggering 1200% YTD growth.
According to AMBCrypto, a similar economic shift could unfold in 2025. Why? Trump’s dislike for high interest rates, his ongoing support for Bitcoin, rising national debt, inflationary pressure, and bold tax cuts.
These factors could put significant pressure on the dollar in the coming months. In such a climate, both Bitcoin and stocks could soar—something Elon Musk would likely back, given his own capitalistic ventures.
Moving forward, monitoring these trends will be key. A repeat of the 2017 cycle could push Bitcoin to newer highs, supported by a weakening dollar and greater adoption.
So, is now the time to invest in Bitcoin?
Looking at the market over the past few days, the answer seems to be a clear ‘Yes.’ Bitcoin’s recovery after the crash has been strong, with a solid 2% jump in the last 24 hours.
However, expecting a smooth, uninterrupted ride to the top would be too optimistic. With the ‘unexpected’ meltdown still fresh, investor risk appetite is on the decline.
Short-term pullbacks are almost certain. If you’re in it for the long game, diving in now could be a smart move, especially with the key factors lining up in Bitcoin’s favor.
Read Bitcoin [BTC] Price Prediction 2024-2025
Despite signs of fear from retail investors, MicroStrategy (MSTR) remains bullish, believing Bitcoin could soon overshadow the dollar in the coming year.
The recent crash might just be the ‘reality check’ investors needed—a healthy retracement before the next move upward.
With institutional investment in Bitcoin stronger than ever, retail capital is likely to follow once FOMO kicks in. The anticipated economic shift in 2025 could set the stage for Bitcoin to make its next big leap.