Complacent US dollar bets risk sharp rebound, impacting crypto
The US dollar has slid to its weakest since February 2022 amid recalibrated Fed rate-cut expectations, cooler inflation data and a brighter global outlook, boosting Bitcoin and other digital assets while eroding stablecoin purchasing power. However, Bank of America warns that extreme bearish positioning on the US dollar has become complacent, with net short bets at historic turning points. Sticky inflation, global growth divergence, geopolitical risks and fiscal policy could drive a USD rebound. Traders should monitor CPI, PCE, employment figures, retail sales, PMIs, FOMC guidance and Treasury yields. A sudden dollar surge may trigger volatility across crypto markets, underscoring the need for diversified exposure and active dollar-risk management.
Bearish
The warning of a potential US dollar rebound creates headwinds for crypto markets. A stronger dollar often leads to reduced liquidity and weaker demand for risk assets like Bitcoin and altcoins, triggering price pullbacks in the short term. Over the long term, digital assets may resume their uptrend if monetary conditions ease, but the immediate threat of dollar strength necessitates caution and could dampen market momentum.