Dollar Surge Threatens Bitcoin and Stocks Amid Fed Rate Hike Fears

Rising Dollar: A Threat to Bitcoin and Stocks

The US dollar has reached an 18-month high, driven by growing expectations of another interest rate hike by the Federal Reserve. This surge could negatively impact Bitcoin and Wall Street, as a stronger dollar reduces demand for riskier assets and makes dollar-based investments more attractive.

The Impact on Bitcoin

Bitcoin pays no interest, making it less appealing to investors when US government bonds offer yields above 5%. A stronger dollar can also reduce demand for speculative investments, particularly cryptocurrencies and high-growth technology stocks. Bitcoin lost nearly 3% over the past week, while Ethereum suffered larger losses.

The Impact on Stocks

The S&P 500 and Nasdaq slipped on Monday, with higher oil prices adding pressure. The 10-year Treasury yield touched 5.35% on October 8, its highest in 24 years. Investors also moved $166 billion into money-market funds that week.

Inflation Report and Rate Hike Expectations

The Fed's benchmark rate currently stands at 3.75%–4%. Futures pricing indicates roughly an 87% chance of another hike by December, although most traders expect no change in October. Cleveland Fed President Beth Hammack warned that persistent inflation could become increasingly difficult to control. Wednesday's CPI report could determine the next market move. Economists expect annual inflation to reach 3.7%, up from 3.4%, while core prices are forecast to rise 0.2% monthly.