US Dollar Recovers, Bitcoin Holds $20K as Fed Decision Looms

Bitcoin, like gold, has been trading sideways for months, a period of unusually low volatility, but now looks poised to trend upward

article-image

Source: Shutterstock

share

key takeaways

  • After the US dollar sank to three-week lows earlier this week, the currency showed signs of recovery Thursday with the US Dollar Index 0.5% higher
  • The ECB again raised interest rates by 75 basis points Thursday, following eurozone inflation of 9.9% in September

Bolstered by rising equities and a fluctuating US dollar, bitcoin has held its position over $20,000 since Tuesday. It is a key resistance level last hit in early October, but the looming central bank decision and rallying dollar may end bitcoin’s rebound. 

Traders are eager to see bitcoin’s relief run continue. The largest digital currency hovered around $20,600 Thursday morning after briefly approaching $21,000 earlier in the day. The S&P 500 and Nasdaq opened lower, losing 0.2% and 1.4%, respectively. 

“Bitcoin behaves like a commodity,” Nick Saponaro, CEO of blockchain Divi Project, said. “Like gold, it’s a store of value that has utility. So, there’s a demand for it no matter what’s happening in the macroeconomic environment.” 

After the US dollar sank to three-week lows earlier this week, the currency showed signs of recovery Thursday, with the US Dollar Index (DXY) up 0.5%. Bitcoin’s rally came in tandem with the dollar’s decline, as a weakened currency fuels risk-on appetite among investors, according to analysts. 

“Gold gained 0.65% thanks to the weaker dollar and continued drop in yields amid the broader dovish pivot in central bank policy expectations,” Tom Essaye, founder of Sevens Report Research, said.

“There are early signs that both the dollar and rates are beginning to roll over, but until we have more definitive evidence that both are actually peaking, it will be too early to call a bottom in gold,” he said.

Bitcoin, like gold, has been trading sideways for months, bringing uncharacteristically low volatility — the value of the world’s oldest currency in continuous use, the British pound, was almost equally in flux. The digital currency’s volatility compared with the Nasdaq and S&P 500 indexes reached a two-year low earlier this week, according to data from research firm Kaiko. Any significant moves in either direction will be expected to bring volatility expansion.

Inflation and global liquidity

While equity market volatility is starting to lessen — the VIX has fallen to below 30 in the past five days — economists are still worried about global liquidity. 

“After more than a decade of abundant liquidity and relative calm in markets, central bank interest-rate increases to contain inflation have been accompanied by elevated market volatility,” analysts from the International Monetary Fund wrote in a note Thursday. “Measures of market liquidity have worsened across asset classes, especially in recent weeks, as heightened uncertainty about the economic outlook and monetary policy left investors with much less risk appetite.” 

The European Central Bank remains focused on bringing down inflation in the eurozone and, like last month, again raised its primary interest rates by 75 basis points Thursday. In September, euro-area inflation reached 9.9%, according to the ECB.

The Federal Reserve is scheduled to meet next week and give a rate decision on Tuesday. Futures markets are currently pricing in a 91.8% chance the central bank will opt for a 75 basis point hike, according to data from CME Group. Cryptos and equities will benefit from a slow down in hikes, whether it comes in November or December. 

“Markets have rallied on the idea that the worst of the global rate hikes are either one, already behind us, or two, about to be behind us,” Essaye said.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

🚀 Build What’s Next — Permissionless IV Hackathon Join us June 22–23 in Brooklyn for the Permissionless IV Hackathon — a 36-hour sprint hosted by Cracked Labs and Blockworks where top builders turn ideas into real products. Come to launch, not just […]

recent research

Research Report Templates (10).png

Research

Kamino has evolved into a full-stack asset scaling suite with V2: unlocking new markets, improving capital efficiency, and catering to various risk profiles. We believe it is best positioned to become the credit backbone of Solana as the ecosystem matures. Simply put, KMNO remains our highest-conviction bet in the Solana ecosystem. This report lays out our thesis.

article-image

With an updated Summary of Economic Projections, the Fed sees growth slowing and inflation increasing

article-image

Where do crypto mobile games go from here?

article-image

Bybit’s Byreal, Binance Alpha and Coinbase’s DEX integrations

article-image

This isn’t the worst hack to ever hit Mt. Gox, but it could be the most entertaining

article-image

Crossover’s CEO discusses institutional interest and how over-the-counter (OTC) trading has picked up in crypto

article-image

Sponsored

This collaboration signifies a major leap forward in expanding the reach and utility of Web3 gaming within the vibrant Asian market