Bitcoin eyes cycle lows as dollar strength and oil rally squeeze risk assets

Bitcoin fell, hitting nearly $66,000 for a lack of support on Thursday as the U.S. dollar index surpassed 108 levels (the highest level since last November) and WTI crude oil surged over $95 due to fears of war in Iran disrupting supply. As a result, the BTC/USD rate dropped to $66,680 (-2.1%) and broke below the 50-day moving average close to $60,000 (the low for the present cycle) from last December. Strength in U.S. dollars typically weakens the pricing potential for crypto assets, resulting in funds being diverted into cash equivalents through money markets that pay 4.8%.

The rally of the U.S. dollar was the result of all of the Fed speakers indicating that the terminal rate would be around 4.25% given the core PCE had not slowed down (continued to go sideways) and due to expected inflation due to tariffs. The U.S. dollar index (DXY) increased by 1.8% when looking back on a weekly basis compared against the euro, yen and pound which has reversed the decline in equity prices experienced in March. The inverse correlation between the two has been strong, reaching -0.87 over the past 90 days, resulting in historically BTC losses ranging from 3% to 5% for each 1% move in the U.S. dollar. Risk-off trading has favored treasury bonds despite 10-year treasury bond yields of 4.45% because equity volatility has risen above 25.

The continued increase in price of oil ($5.12) during the month of April has increased the pressure on mining due to: (1) mining costs in March of 2023 were higher than for 2022 by 18% and are currently projected to be $48,000 per coin using the current hash rates; and (2) the delay of Fed rate cuts due to the anticipated inflation being passed on to consumers delayed expectations of rate cuts until September 2023. Sanctions against Iran have removed 1,200,000 barrels per day from the global oil supply and have driven up the price of Brent crude towards $100. Bitcoin miners are now seeing margin compression as energy represents greater than 60% of total costs and approximately 15,000 BTC are sold monthly to cover their expenses.

On-chain data signals capitulation brewing. Short-term holder realized price hit $82,400 while 46% of supply trades underwater 2022 bear territory. Exchange inflows spiked 28% week-over-week alongside negative funding rates across CME futures. ETF net outflows reached $3.2 billion YTD, with Grayscale alone dumping 18,000 coins.

Macro headwinds align brutally. Trump's tariff regime 25% on Mexico/Canada, 60% on China forecasts 2.8% core inflation acceleration, anchoring real yields higher. OPEC+ quota adherence falters amid Russian export surges, but Middle East volatility caps relief. Gold's 3% monthly gain underscores fragmented haven demand excluding BTC.

Technicals flash breakdown confirmation. Death cross formed as 50-day average crossed below 200-day at $90,800. RSI plunged to 28 oversold but momentum fading. $62,000 aligns with 0.618 Fibonacci retracement from October's $126,000 peak.

Traders eye Friday's payrolls for recession probability updates. Sub-150k print could trigger emergency cuts, though dollar strength likely persists through Q2. Bitcoin's risk premium relative to Nasdaq-100 widened to 8.2% elevated versus historical norms.