• Bitcoin (BTC) prices dropped to $23,329 on Feb. 3 after a night of losses
• The drop in BTC/USD was caused by a rebound in U.S. dollar strength
• Analysts warned traders to pay attention as the U.S. Dollar Index (DXY) had the potential to cause further drops across risk assets
Bitcoin Price Drops Amid US Dollar Strength
Bitcoin (BTC) experienced a sudden dip in price on February 3rd as U.S. dollar strength rebounded and erased bulls’ latest progress. Market data from Cointelegraph Markets Pro and TradingView showed BTC/USD hitting lows of $23,329 on Bitstamp and failing to sustain momentum amid macro market volatility.
US Dollar Index (DXY)
The US Dollar Index (DXY), which measures the value of the USD against six other major currencies, put in a conspicuous bounce, consolidating gains throughout the day. This increased pressure on cryptocurrencies such as Bitcoin and caused it to return to its prior position below $24,000. Popular trader Crypto Tony warned traders to “pay attention” as DXY could spark further drops across risk assets if it retests a level of 102 that was support before becoming resistance again for the currency index.
Federal Reserve Rate Hike Impact
The sudden dip can be largely attributed to excitement over the Federal Reserve’s rate hike fading away and market commentary shifting away from this development following an initial move that was soon countered by investors fleeing back into USDs for safety instead of cryptocurrencies like Bitcoin or Ethereum (ETH).
Michael van de Poppe, contributor at Cointelegraph Markets Pro analyzed what this means for crypto markets going forward stating “I do expect it’s likely DXY will retest what was support and now overhead resistance” while Matthew Dixon, founder and CEO of Evai crypto rating platform agreed with him adding “This would align with my inverse expectation on Btc and Crypto moving down a touch before a final ‘blowoff’ high (not much higher than today’s highs)”.
Despite significant gains over recent weeks, Bitcoin markets are still highly volatile and subject to external influences such as changes in global economic conditions including U.S dollar strength or weakness versus other major currencies around the world so investors need to remain cautious when entering or exiting positions related to any cryptocurrency asset..