Bitcoin: watch out for the dollar and the Fed

At this moment, there are two key elements that could significantly influence the price trend of Bitcoin: the Fed and the US dollar.

The price of Bitcoin in dollars (BTCUSD) largely depends on the USD liquidity available in the markets, and this is influenced by several factors, with the main ones being the Fed’s monetary policy and the fiscal policies of the US government. 

Additionally, on a global level, it is also influenced by the Dollar Index, because fluctuations in the DXY have a significant impact on the dollar value of liquidity present in markets in other currencies. 

The Dollar

Currently, the US dollar influences the price movement of Bitcoin in two ways: liquidity and the Dollar Index. 

Regarding liquidity in particular, with the onset of the government shutdown in October, a significant portion of dollar liquidity was accumulated in government accounts and not spent. 

Before the shutdown, there were just over 800 billion dollars in the US government accounts, but between the end of October and the beginning of November, they had surged to over 950. In other words, due to the shutdown, a significant 150 billion dollars did not enter circulation, remaining locked in government accounts until November 12. 

In the first week after the end of the shutdown, only 12 billion re-entered circulation, while the data for the second week will be published only tomorrow evening. 

All this may have triggered a mini liquidity crisis in the American markets, causing not only Bitcoin but also stocks on the US exchanges to register a decline in prices. 

This liquidity crisis seems not yet entirely resolved, although the path towards its resolution has already begun. 

The important thing is that this is a crisis that will certainly be overcome in the coming weeks, although nothing prevents us from imagining that others may also arise. 

The Dollar Index

The Dollar Index, on the other hand, is following a trend that closely resembles that of late 2017. 

2017 was Donald Trump’s first year in the White House during his first term, while 2025 is the first year of his second term. 

In particular, starting from the end of July, the two trends appear extremely similar, so much so that one might expect a further decline in DXY tomorrow precisely because this is what emerges from the comparison with 2017. 

In this case, however, there is no certainty that the Dollar Index, nor that the correlation with 2017 will continue, but for now, things are indeed proceeding in that direction. 

Additionally, it should be noted that in the final months of 2017, the Dollar Index experienced a significant decline divided into three phases interspersed with two minor rebounds, and currently, this year’s trend appears to be right in the midst of the first descending phase of the year-end. 

In theory, therefore, after a small and brief rebound that could occur in the second half of December, there would still be room for two significant Bitcoin price rallies between January and February 2026. 

The Fed

To all this, it should be added that the Fed will very likely cut interest rates for the third consecutive time on December 10. 

Lower interest rates make U.S. bonds slightly less attractive, as they are bought and sold in dollars. 

All this should lead to a sale of US bonds after December 10, consequently also selling dollars, which could cause the Dollar Index to fall. 

Although in reality the markets are already pricing in this scenario today, they are doing so only partially, also because bond sales have not yet begun. 

Therefore, the Fed could also play a role in driving up the price of BTC.

Trump’s Policies

But there’s more. 

The policies of Donald Trump based on tariffs to reduce the imbalance of the US trade balance with foreign countries are not yielding significant results. 

In fact, they are actually causing more harm than benefits, as they have, for instance, pushed inflation back up to 3%, making it difficult for the Fed to cut rates. 

To reduce imports while simultaneously increasing exports, a policy of partial dollar devaluation would be much more effective, meaning a significant drop in the Dollar Index, as occurred at the end of 2017. 

This leads to the belief that there might even be Trump’s political will to lower the DXY in the coming months. Furthermore, should he opt for a reduction in tariffs, it would significantly ease the decline in inflation, making it much easier for the Fed to further cut rates in 2026.