After dropping below $100,000 in December, Bitcoin (BTC) has been facing challenges in recovering its position in the market. Currently trading at $96,789 with a 1.5% increase in the last 24 hours, BTC is still struggling to reach its all-time high.
Despite the potential for a rebound following the upcoming U.S. presidential inauguration, there are two significant factors that could continue to influence Bitcoin’s price.
USD Dominance Reaches Two-Year Peak
The U.S. dollar index (DXY), which gauges the dollar’s performance against major global currencies, has recently spiked to 109 – the highest level since November 2022. This surge indicates a notable strengthening of the U.S. dollar.
Historically, there is an inverse relationship between the DXY and Bitcoin’s price, meaning that a stronger dollar could constrain the coin’s upward trajectory. Moreover, a robust dollar often diminishes the appeal of high-risk assets like cryptocurrencies.
This reduced demand is evident in the ETF market, where the BlackRock iShares Bitcoin Trust (IBIT) ETF experienced an all-time high outflow of $332M on the first trading day of 2025. The combined outflows from all 11 Bitcoin ETFs reached $242M, as reported by SoSoValue.
If this outflow trend persists, it may amplify selling pressure, ultimately leading to a downward trend for BTC.
Increase in Stablecoin Supply Ratio
The decline in demand is not only observed among institutional investors but also within the retail sector. For example, as per CryptoQuant data, Bitcoin’s Stablecoin Supply Ratio (SSR) has reached a seven-day high of 17.
A higher SSR indicates a lower supply of stablecoins relative to BTC’s market capitalization, resulting in reduced buying pressure that could push prices downward.
Bullish Sentiment Despite Market Indicators
While market conditions suggest waning demand and buying pressure, the Fear and Greed Index, assessing market sentiment, currently stands at 74, indicating continued optimism among traders.
Although the index rose from 65 earlier this week, signaling positive sentiment towards BTC, sustained selling pressure could limit potential gains in the market.