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How Did Trump's Previous Election Affect Bitcoin? This Time, Things Could Change! - Coin Bulletin
As the US dollar strengthened after Donald Trump's victory and the Federal Reserve's limited interest rate cut policies, investors are wondering how macroeconomic uncertainties will shape the crypto market.
Since the election victory of President-elect Donald Trump, the dollar index (DXY) has gained over 3% against major trading partners. This situation echoes the dollar movements following Trump's victory in 2016 and raises new questions for the cryptocurrency market.
Dollar and Bitcoin: Can history repeat itself?
In 2016, the dollar index peaked in December after Trump's election victory, then declined. During the same period, Bitcoin made a historic bull run in 2017. However, the situation may be different after 2024. While the dollar has remained strong so far, Trump's economic policies and the Fed's interest policies may support this rise.
The strengthening of the dollar is generally seen as a negative signal for risky assets. However, Trump's explicit support for Bitcoin and the leading cryptocurrency reaching record levels in the post-election period suggests that this time the situation could be different.
Possible scenarios for Bitcoin
According to Andre Dragosch, the head of research at Bitwise Europe, the Fed's decision to limit interest rate cuts contributes to the appreciation of the dollar. While the Fed anticipates only two interest rate cuts for the year 2025, the US economy is diverging from other markets with a growth rate of over 3% and an inflation rate exceeding the target. Dragosch points out that the strong position of the dollar could create pressure on Bitcoin.
However, it is thought that the uncertainty that Trump's trade policies and tariffs could create in the global markets may increase the demand for the dollar. Experts discuss that this situation could have a dual impact on Bitcoin. On the one hand, the strengthening of the dollar may suppress the price of Bitcoin, while on the other hand, global uncertainties may direct investors to Bitcoin as a safe haven.
The inverse correlation between the Dollar Index and Bitcoin is a dynamic that catches the attention of market players. It is common for Bitcoin to show a downward trend as the dollar strengthens. However, during the Trump era, the high demand for Bitcoin may make this correlation more complex. Macroeconomic uncertainties can be among the factors supporting both the dollar and Bitcoin.
The current rise of the dollar, supported by the Fed's policies and Trump's trade strategies, could create a challenging but potentially rewarding period for Bitcoin.