Dollar and US Treasury Yields Emerge as Key Variables in Cryptocurrency Market

The dollar and US Treasury yields have emerged as major variables in the cryptocurrency market. The market is focusing on how long higher interest rates will last, which are expected to be higher than the September rate decision. Analyst Lewis Huang from Bitget analyzed that the comments from the Chair of the Federal Reserve have fueled expectations for a prolonged period of high rates. Huang believes that high rates could persist until inflation reaches the Fed's 2% target. On August 28, Chair Powell announced in Jackson Hole that the PCE inflation rate was 3.7% on a 12-month basis and 4.1% on a 6-month basis, emphasizing that price stability is the Fed's goal. Huang predicts that if future CPI, PCE, and employment indicators show strength, the yields on US 2-year Treasury bonds and the dollar index will maintain their strength. Conversely, he warned that if inflation decreases and the labor market weakens, expectations for rate hikes could diminish. In the cryptocurrency market, the combination of the dollar and interest rates is crucial, as a strong dollar can reduce the appeal of risk assets. Huang stated that to determine market direction, one must observe the correlation between the dollar, US Treasury yields, gold, and stock indices.

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