Bitcoin Price Stalls at $90K Resistance as Dollar Strength Gains Momentum

Bitcoin (BTC) has encountered a significant pause in its bullish momentum, hitting a critical resistance level at $90,000, a threshold identified by CoinDesk last week. This stall comes as foreign-exchange traders are increasingly focused on the strengthening U.S. dollar, which may lead to financial tightening and potentially hinder Bitcoin's upward trajectory.

Since early Tuesday, Bitcoin's impressive rally has faced challenges at the $90,000 mark, with prices momentarily dipping to $85,000, according to CoinDesk data. This type of consolidation is not unusual following a remarkable surge of $20,000 within just a week, which has shattered previous all-time highs. Such pauses often serve to recharge bullish sentiment, with traders in the options market now positioning for a potential breakout towards the $110,000-$120,000 range, as reported by QCP Capital.

The timing of Bitcoin's slowdown coincides with reports of traders betting on a sustained increase in the dollar index (DXY), which measures the U.S. currency's strength against major global currencies. ING noted on Tuesday that volatility levels are rising as market participants adjust their positions in anticipation of a stronger dollar. "All we would say here is not to fight this emerging trend," they advised.

Both Bitcoin and the U.S. dollar have seen significant gains since Donald Trump's election victory a week ago, with the DXY climbing 2.7% to reach 106.78, marking a six-month high, according to TradingView.

However, persistent strength in the dollar could re-establish a historical negative correlation between Bitcoin and the dollar, potentially slowing or even halting Bitcoin's ascent. The U.S. dollar's status as a global reserve currency means that its appreciation can lead investors with dollar-denominated debts to reduce their exposure to riskier assets, including cryptocurrencies and stocks.

Additionally, yields on U.S. Treasury notes are rising, further bolstering the dollar. The yield on the two-year note increased to 4.36% on Tuesday, the highest level since July 31, while the 10-year note approached its multi-month high of 4.46% from last week.

Market dynamics may also reflect concerns regarding President-elect Donald Trump's policies, particularly mass deportations, which could lead to inflationary pressures and complicate the Federal Reserve's ability to lower interest rates in the coming year. Dario Perkins, managing director of global macro at TS Lombard, highlighted in a note to clients that strong immigration has historically allowed central banks to maintain a more relaxed stance on inflation. He cautioned that reversing these trends through mass deportations could recreate labor shortages reminiscent of the post-COVID era, complicating economic recovery.