The recovery of Bitcoin encounters resistance from safe-haven demand, with the DXY rising possibly suppressing the rebound space
With the escalating geopolitical conflicts over the past week, the global demand for safe-haven assets surged, and the US dollar became one of the few assets rising against the trend during the turmoil. This move seems to break the long-term weakening pattern of the US dollar index (DXY) that has persisted for over a year.
Looking back at the entire year of 2025 and early 2026, influenced by expectations of interest rate cuts and policy uncertainty, the dollar index fell to a four-year low of 96 in January this year. However, the recent situation appears to be reversing, with the DXY rising from 97.8 points to above 99 this week.
The general consensus in the market believes that the price trend of Bitcoin is usually negatively correlated with the strength of the US dollar. This also means that a strong dollar typically exerts significant selling pressure on high-risk assets such as cryptocurrencies.
Just two months ago, the dollar was still in a prolonged period of weakness. At that time, the market was generally dragged down by expectations of interest rate cuts, policy uncertainty, and the trend of 'de-dollarization', causing the dollar's performance to weaken all the way.
However, as tensions in the Middle East escalated, safe-haven funds quickly flowed in, driving a strong reversal of the dollar, seemingly ending the long-term weakness of the DXY.
Analysts pointed out that if the Middle East conflict continues to develop with the current intensity, it may lead to sustained high inflation and a stronger dollar, significantly reducing the likelihood of rate cuts by the Federal Reserve.
Market data corroborates this view; according to FedWatch, the probability of the Federal Reserve maintaining the current interest rate in March is as high as 97.4%, and this expectation of keeping rates unchanged further solidifies the dollar's strength, which is bearish for risk assets like BTC.
Even more concerning is that large institutions like Galaxy Digital have been observed recently taking profits from the rebound, selling over 3,100 Bitcoins. Additionally, according to a report by CryptoQuant, the current Bitcoin bull market score index is only 10/100, indicating that the overall market environment remains pessimistic.
Some analysts have expressed concerns that the current rebound is quite similar to the 'false breakout' at the beginning of 2026. Although both are driven by geopolitical conflicts, the upward momentum of Bitcoin may not last long in the face of a dollar rebound.
In summary, constrained by the safe-haven capital inflow triggered by the situation in the Middle East and the strong dollar's suppression, the current rebound of Bitcoin is unstable, and investors should remain cautious, being wary of the risk of the market replaying a false breakout.
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