The price of Bitcoin (BTC) in recent days seems to be completely at the mercy of Donald Trump’s foreign policy decisions, and the Dollar Index.
Technically, the current trend of the BTC price is that of a long lateralization with medium-intensity volatility.
In fact, after the electoral victory of Trump, it rose from $70,000 to $99,000 in just under three weeks, and then began a long phase still ongoing of oscillation around $99,000, with peaks above $109,000 and below $90,000.
The impact of the Dollar Index on the price of BTC
In recent days, the trend of the price of BTC has followed that of the Dollar Index in reverse.
It should be remembered that in the medium/long term the price of Bitcoin tends to be inversely correlated to the strength of the US dollar, which is measured precisely with the Dollar Index, that is, an index that summarizes the exchange rates of the dollar against a basket of other important currencies globally.
On January 13, when BTC hit the low of this phase of lateralization with volatility below $90,000, the Dollar Index reached the highest point in recent years at 110 points.
At that point, however, the upward trend of the strength of the US dollar reversed, but this reversal lasted only two weeks, with a minimum peak reached at 107 points. During that descent, the price of Bitcoin had risen to $109,000.
Starting from Tuesday, January 28, the Dollar Index has returned to growth, although not continuously. In fact, for example, after climbing back to 108.1 points, on Thursday the 30th it fell to 107.5, but only for a very brief moment.
Yesterday it pushed up to 109.7 points, but always only for a brief moment, while now it seems to oscillate around 109 points.
This up and down is slightly unusual for the Dollar Index, and in fact causes continuous oscillations in the price of Bitcoin.
The foreign policies of Trump
To slightly oscillate the Dollar Index in an anomalous way are the foreign policies of Donald Trump, particularly regarding those related to tariffs.
At first, Trump had announced the practically immediate introduction of tariffs at 25% for goods imported into the USA from Mexico and Canada, and 10% on those imported from China.
Bloomberg, however, had warned that there was speculation that these tariffs would not come into effect immediately, but the White House hastened to publicly announce that instead the implementation was scheduled for today.
Subsequently, it was learned that Mexico and Canada reached an agreement with Trump thanks to which, in fact, the tariffs against them were postponed by a month, as hypothesized by Bloomberg’s rumor, while those with China were actually introduced today.
The fact is that the tariffs imposed on goods imported into the USA inevitably increase their price in the US market, and this price increase will cause inflation.
The problem is that, in the event that such inflation were sufficient to reverse the trend of recent months, the Fed would not only be forced to indefinitely halt the plan of interest rate cuts, but would also end up having to start thinking about raising them.
At this moment, the markets seem convinced that this will not happen, meaning they simply believe that the real impact of the data on inflation will be irrelevant, but it is not certain that things will remain this way. On one hand, it is possible that in the end, the tariffs against Mexico and Canada may not be applied, as they are used only as a bargaining tool, while on the other hand, it is also possible that sooner or later those with China may be removed. Furthermore, Chinese goods tend to be those with lower prices, so the 10% tariffs might have a lesser overall impact.
The Bitcoin (BTC) price forecasts
The markets predict that the Fed will not cut rates again until May, but as of today, they consider it possible that it will start cutting them again from June.
The short-term hypothesis, however, is that the Dollar Index could rise further, perhaps even up to 111 points.
There is, however, a lot of uncertainty about the medium-term evolution.
As for the price of BTC, no major upheavals are expected in the short term, barring sensational news, while in the medium term, much will depend on the dollar.
It should be remembered that in the past the Dollar Index was at its maximum levels only for a few months, and that a long period of strong decline always followed the highs. The problem is that the highs of this period might not only be the 111 points, because there seems to be room to rise further if Trump continues on this path.
From 2002 onwards, the Dollar Index has never risen above 113 points, and since 1987 it has never risen significantly above 120 points. Therefore, not only would the possible 111 points already be a very high figure, but a very clear surpassing of that threshold would be a record since the burst of the dot-com bubble onwards.
In this phase, it seems difficult for Bitcoin to break free from the inverse correlation with the US dollar.
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