Bitcoin traded down to $59,060 on Wednesday despite a sharp retreat in oil prices, with traders worried that a bounce back toward $60,000 might not hold as the US dollar strengthened.
Dollar strength weighs on bitcoin
The US dollar jumped to its highest level against a basket of foreign currencies in 13 months, signaling growing confidence in the US economy.
This metric typically shows a negative correlation with bitcoin’s price, since some investors view the asset as a hedge against inflation traditionally driven by high oil prices.
Gold prices fell below $4,000 for the first time in months as Brent crude oil plummeted below $74, nearing levels seen before the conflict in Iran.
Inflationary pressures eased after a memorandum of understanding between the US and Iran temporarily reopened the Strait of Hormuz.
Macro and AI sector pressure
Inflation will take time to cool toward the Federal Reserve’s 2% target, leading traders to expect interest rates to stay higher for longer, which favors fixed-income investments.
US Labor Department data showed unemployment benefit claims fell by 4,000 from the prior week, confirming the economy is not slowing.
Meanwhile, the US M2 money supply increased to $23.05 trillion in May, up from $22.8 trillion the prior month.
For now, the tech sector remains investors’ largest bet. Micron reported strong quarterly earnings on Wednesday, with its market cap climbing to $1.16 trillion after a 265% gain over six months.
Strategy and ETF outflows
The slowdown in Strategy’s bitcoin acquisition pace has likely added to weaker sentiment.
The Michael Saylor-led firm added just 520 BTC during the week ending June 21, its lowest weekly intake in 18 months, while using $300 million in proceeds to replenish its cash position.
Heavy net outflows from spot bitcoin ETFs and disappointment that MSTR trades below its bitcoin acquisition cost have added significant pressure, leaving further downside from $59,000 on the table.
