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
  • 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

Javits Center North | 445 11th Ave

Tues - Thurs, March 24 - 26, 2026

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.

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.

recent research

Unlocked by Template.png

Research

Institutional staking providers specialize in offering secure, compliant, and scalable solutions for organizations, asset managers, and individuals who wish to stake large volumes of digital assets. Staking-as-a-Service Providers (SaaSPs) act as intermediaries, running blockchain nodes and managing the technical complexities of staking on behalf of clients, often providing custody, reporting, and yield optimization features across a broad range of assets and networks.

article-image

Hashdex CIO says firm’s crypto index fund could one day hold 200 assets

article-image

The deal seeks to boost CoinShares’ US expansion and integrates Bastion’s quantitative strategies into its digital asset platform

by Blockworks /
article-image

The defense argues DOJ is criminalizing open-source code and violating First Amendment protections in landmark crypto case

by Blockworks /
article-image

One issuer reported “high conviction” Solana ETFs would be approved in the first half of October

article-image

Should Congress not pass a budget, the SEC will be operating with a skeleton staff starting Wednesday

article-image

Stablecoin, DePIN and robo-advisor teams made the finals