Julien Bittel, the head of macro research at Global Macro Investors (GMI), recently posted on X warning that the soaring dollar could put immense pressure on global liquidity and may also suppress unexpected economic outcomes in the US. This dynamic has not only caught the attention of traditional financial markets but has also garnered close attention from cryptocurrency investors.
Bittel pointed out that in recent months, the 'dollar wrecking ball' has been aggressive, its influence continuing to ferment, causing the financial environment to tighten sharply, and the US economic data has shown a significant chain reaction, affecting various economic levels to different degrees.
In other words, the rapid appreciation of the dollar has impacted the US economy, and this effect is a delayed response expected after the tightening of the financial environment.
Although the market generally does not expect continued rate cuts this year, the Fed's policy could shift direction quickly. Thus, Bittel believes that conditions are ripe for the Fed to be forced to intervene soon. By then, the strength of the dollar may be constrained, and the pressure of rising yields could also ease.
The impact of the dollar collapse on the cryptocurrency market
From the perspective of cryptocurrencies, a shift in policy from tightening to loosening could be significant. Historically, risk assets (including Bitcoin and other cryptocurrencies) have reacted positively to accommodative monetary policies and a more liquid environment. If the dominance of the dollar truly peaks and begins to wane, it may alleviate the liquidity tightening that has been weighing on cryptocurrency prices in recent months.
Moreover, accommodative economic policies may have a positive effect on the cryptocurrency market, as historically, risk assets tend to perform well during periods of monetary policy easing and increased liquidity. Therefore, if the dollar's dominance begins to weaken, it could help relieve the liquidity pressure that has recently impacted cryptocurrency prices.
Bittel also reminds us not to overlook the impact of these macro events on market sentiment. He explains that these dynamics might alleviate the liquidity pressures facing the market, thereby creating an opportunity for recovery and rebound for risk assets. In this context, seemingly unfavorable economic news may actually become a positive factor for the market.
Interestingly, the current trend of the dollar index seems to resemble that during President Trump's time. In 2017, Trump stated that the dollar was 'too strong,' and the economic policies under his leadership led to a significant decline in the dollar index (DXY), which subsequently prompted a strong rebound in the Bitcoin and cryptocurrency markets. Bittel also mentioned this phenomenon in his previous analysis.
In summary, the above views suggest that once the dollar collapses, it will inevitably create tumultuous waves in the cryptocurrency market. The subsequent chain reactions will also bring various uncertainties to the market direction. Therefore, investors need to remain vigilant to cope with any severe fluctuations that may arise.
💬 What are everyone's thoughts on this? Do you think the 'dollar collapse' is good or bad for risk assets? Or do you have any unique insights?
