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Bitcoin Dips as DXY, US Yields Rise on Strong US Economic Data – Here’s Where BTC is Headed Next

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Michael Davis

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Michael Davis

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Crypto market analyst & on-chain data enthusiast. Breaking down trends, narratives & cycles in BTC, alts, and macro. 🧠 Deep dives, smart money moves & alpha for the coming bull run. Stay ahead of...

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Last updated:

July 27, 2023

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Bitcoin (BTC) has come under modest sell pressure on Thursday amid a rise in US bond yields and the US Dollar Index (DXY) as a result of stronger-than-expected US economic data.

The BTC price was last around $29,100, down nearly 1% on the day, with the bears eyeing a retest of this week’s sub-$29,000 lows.

Data on Thursday showed that the annualized quarterly pace of US economic growth unexpectedly rose to 2.4% in the second quarter, well above expectations for a slight slowdown to 1.8% from 2.0% in the first quarter.

Q2 Price Index data released alongside the economic growth figures showed inflation fell to an annualized pace of 2.2%, well below the expected drop to 3.0% from 4.1% in Q1.

Meanwhile, weekly US jobs data showed initial jobless claims falling to 221,000, well below the expected 235,000 and at levels consistent with a still very healthy jobs market.

All said, the strong growth and jobs data coupled with the larger-than-expected strengthened the argument that the US economy will achieve a so-called “soft landing” – i.e. where the Fed is able to bring inflation back to its 2.0% target without triggering a recession with all of its monetary policy tightening.

That pushed US yields and the DXY higher, weighing on bitcoin, which tends to have a negative correlation to both similar to how gold does.

Bitcoin is a non-yielding asset, therefore higher bond yields raise the opportunity cost of holding it.

A stronger dollar, meanwhile, increases the cost for holders of international currency to purchase USD-denominated bitcoin, reducing its demand.

Here’s Where Bitcoin (BTC) Is Headed Next

Macro headwinds from the strong US dollar and rising yields risk pushing bitcoin to the south of its 50-Day Moving Average (DMA), which over the past few days has been acting as strong support in tandem with the psychologically important $29,000 level.

Technical selling after bitcoin’s recent rejection of resistance at $29,500 is also likely weighing.

All said, amid a lack of fresh positive catalysts regarding US spot bitcoin ETF applications, bitcoin’s steady crawl lower could continue into the month’s end.

A retest of key support in the low-$28,000s, where the 100DMA and 2023 uptrend are likely to come into play, seems likely.

But this may be an area where longer-term bulls might want to get involved once again.

Indeed, many analysts are bullish on bitcoin’s long-term trajectory right now.

For instance, the likes of Morgan Creek Capital, Standard Chartered and Matrixport have all forecast the BTC price to reach six figures in the coming years.