Bitcoin's prospects are getting a boost from the weakening US dollar, but analysts caution that significant macroeconomic risks could delay a surge to $120,000. While a softer dollar generally favors Bitcoin, global trade tensions and potential economic slowdowns could dampen investor sentiment and cap gains.
Bitcoin often exhibits an inverse correlation with the U.S. Dollar Index (DXY), which measures the dollar's strength against other major currencies. A weakening dollar can make Bitcoin more attractive as an alternative investment and a hedge against inflation. When the dollar's purchasing power declines, investors may seek assets like Bitcoin to preserve value. This is because Bitcoin has a fixed supply of 21 million, making it resistant to inflation unlike fiat currencies.
Recently, the DXY fell after disappointing U.S. jobs data increased expectations of Federal Reserve interest rate cuts, which undermined the dollar's yield advantage. This dollar weakness has fueled hopes for Bitcoin to reclaim the $120,000 level. Independent market analyst Lyn Alden suggests that a weaker dollar might be necessary for the U.S. to stabilize its financial system, potentially benefiting Bitcoin and gold as the dollar's global dominance diminishes.
Despite the favorable impact of a weaker dollar, several macroeconomic risks could delay Bitcoin's ascent to $120,000. Global trade tensions, spurred by new U.S. import tariffs, can raise domestic prices and pressure monetary policy, creating uncertainty in the market. Concerns about a potential economic slowdown or recession could also lead investors to become risk-averse, limiting Bitcoin's gains.
Historically, even when the DXY has declined, Bitcoin has struggled to maintain upward momentum due to broader economic concerns. For instance, between June and September 2024, a declining DXY didn't prevent Bitcoin from falling.
Currently, Bitcoin is trading around $114,000, facing resistance as traders assess its potential for another rally before year-end. Short-term technical indicators suggest consolidation and potential weakness, while long-term projections remain bullish, supported by institutional interest and macroeconomic factors.
Analysts are closely watching if Bitcoin can break above the $115,000 mark, which could pave the way towards $117,800 and a retest of its all-time high near $122,296. However, some anticipate a short-term pullback to the $110,000–$112,000 range before a potential bounce.
Several factors are expected to influence Bitcoin's price in the coming months:
Despite recent corrections, many analysts maintain bullish long-term Bitcoin price predictions. Tom Lee of Fundstrat continues to target $200,000 to $250,000 by the end of 2025. Other analysts have set targets around $200,000, while some have lowered their predictions to $160,000. Binance users predict that BTC might reach $147,270.47 in the next 5 years.
The long-term outlook for Bitcoin remains positive, driven by increasing institutional adoption and favorable macroeconomic conditions. However, investors should remain aware of potential risks and volatility.
