In a post shared via X on January 14, Julien Bittel, Head of Macro Research at Global Macro Investor (GMI), echoed a warning about the surging dollar and its impact on financial conditions—an echo that many market observers, including those within the crypto sphere, are listening to with interest.
How The Dollar Wrecking Ball Affects The Crypto Market
According to Bittel, the “dollar wrecking ball” has gained impressive momentum over the past couple of months, exerting significant pressure on global liquidity and dampening economic surprises in the United States. While the crypto market is no stranger to macro-driven turbulence, Bittel’s perspective hints that relief may be on the horizon. “Dollar wrecking ball in full swing here,” wrote Bittel, referencing the greenback’s sharp ascent over the past 15 weeks.
He maintains that the surge has “massively tightened financial conditions,” setting off a ripple effect that is beginning to register in US economic data. In his words: “This sharp move is already taking a toll on US economic surprises – something I outlined as a base case in the GMI and MIT reports back in Q4 of last year.”
Bittel notes that economic surprises have cooled since November’s peak, and he believes this is precisely the delayed reaction one would anticipate after such a forceful tightening in financial conditions. Crucially for market participants, including crypto investors, this development could change the Federal Reserve’s policy trajectory sooner than some anticipate.
“Here’s the important part: This setup is exactly what I believe will pave the way for the Fed to step in and begin easing rates further soon – despite the prevailing narrative floating around for zero cuts in 2025 and the forward curve currently pricing in just 28 bps for the whole year,” Bittel claims.
While the mainstream consensus expects minimal rate cuts over this year, Bittel highlights early signs that conditions ripe for policy easing are already taking shape. According to him, the Fed may find itself compelled to step in once weaker US economic data becomes too apparent to ignore.
“Now, with the lag effect kicking in, weaker economic surprises are emerging, and as those continue to deteriorate, the Fed will have no choice but to respond. When that happens, we’re likely to see the dollar’s strength finally capped and the pressure from rising yields start to ease,” Bittel explains.
From a crypto standpoint, a potential shift away from tightening could prove significant. Historically, risk assets—including Bitcoin and other cryptocurrencies—have responded positively to accommodative monetary policy and an environment where liquidity flows more freely. If the dollar’s dominance indeed crests and recedes, it may loosen the liquidity squeeze that has weighed on crypto prices in recent months.
Bittel also drew attention to the psychological dimension of these macro events. As he put it: “This will then help alleviate the liquidity squeeze that’s been building, giving risk assets the breathing room they need to rally again. Bad news = good news…”
Remarkably, the DXY could take a similar course to that of Donald Trump’s first term as US President. In 2017, calling the dollar “too strong”, his policies caused the DXY to fall sharply, triggering a fabulous rally for the Bitcoin and crypto market, as Bittel discussed in a previous analysis.
At press time, BTC traded at $96,228.
