CoinDesk 20 Index: 2,598.80 -1.86%
Bitcoin (BTC): $87,804.73 -0.04%
Ether (ETH): $3,166.56 -3.78%
S&P 500: 5,983.99 -0.29%
Gold: $2,611.13 +0.00%
Nikkei 225: 38,721.66 -1.66%

A message from Kraken

Bitcoin has applied the brakes to its record-shattering rally after encountering resistance at the $90,000 level. Having briefly hit $90,100 on Coinbase during the U.S. afternoon Tuesday, BTC succumbed to selling pressure, falling as low as $86,200 during the European morning. It subsequently recovered some ground to settle around $87,500, about 2.65% lower than its Tuesday highs. Altcoins saw greater losses, with ETH and SOL falling by 3.6% and 2.8, respectively, in the last 24 hours. The broader crypto market, as measured by the CoinDesk 20 Index, dropped 1.4%.

The release of October U.S. consumer price data at 8:30 a.m. ET, could signal a period of sentiment change in the crypto market. The report is expected to show that the cost of living rose 2.6% year-on-year last month following a 2.4% increase in September. Inflation data releases brought downside volatility to bitcoin in the first quarter, with BTC performing negatively as inflation remained almost double the target. For example, it fell as much as 7.5% on Jan. 12, when the U.S. reported a December figure that was the highest since June 1982.

President-elect Donald Trump confirmed plans to create a Department of Government Efficiency (DOGE), a clear nod to the dog-themed memecoin, with Elon Musk and Vivek Ramaswamy at the helm. The duo will work from outside the government to offer advice and guidance to drive large-scale structural reform and create an “entrepreneurial approach to Government never seen before.” A CoinDesk analysis flagged in mid-October that the DOGE trade was gaining interest among investors for its memetic nature, and that there could be more chatter of “DOGE” in mainstream media and retail trading circles that fuels attention and interest in the token. The DOGE price has gained almost 250% in the past 30 days, reaching 2021 levels on Tuesday with traders now eyeing the $1 mark as a long-term target.

It could be more than coincidence that the rally has paused alongside reports of traders betting on a continued rise in the dollar index, which tracks the U.S. currency's value against major fiat currencies.

"Traded levels of volatility are rising notably as it seems the market is actively positioning (investors) or hedging (corporate treasurers) in expectation of a stronger dollar," ING said Tuesday. "All we would say here is not to fight this emerging trend."

Both BTC and USD, part of the so-called "Trump trades," have surged since Donald Trump's victory in the U.S. election a week ago. The DXY has risen by 2.7% to 106.78, hitting a six-month high, according to TradingView.

Persistent dollar strength, however, could restore the historical negative correlation between the two and at least slow down BTC's ascent, if not halt it altogether.

That's because the U.S. dollar is a global reserve currency with an outsized role in global trade, international debt and non-bank borrowing. An appreciating dollar commonly has investors with dollar-denominated debt and servicing costs trim exposure to riskier assets such as stocks and cryptocurrencies.

A message from Kraken

- Omkar Godbole