Dollar Index Surge Threatens Bitcoin's Recovery
By John Nada·Feb 3, 2026·2 min read
The U.S. dollar index's strongest gain in nine months threatens Bitcoin's recovery. Investors should prepare for ongoing volatility in the crypto market.
A resurgent U.S. dollar index, logging its strongest two-day gain in nine months, poses a serious threat to Bitcoin's recovery. As of February 3, 2026, Bitcoin's price sell-off has paused, stabilizing between $75,000 and $80,000 after a weekend decline from $85,000 to below $75,000. However, the outlook for a sustained rebound appears bleak as the dollar index springs back to life, potentially squeezing cryptocurrency prices.
With the dollar index rising 1.5% to 97.60, some analysts are expressing concerns. A stronger dollar raises the opportunity cost of holding dollar-denominated assets like Bitcoin, gold, and commodities. Generally, a rising dollar index (DXY) tends to be bearish for BTC. This is compounded by financial tightening, as a stronger dollar makes money and credit more expensive, discouraging risk-taking in financial markets.
According to TradingView, the dollar's renewed strength is likely fueled by fears regarding the incoming Federal Reserve President, Kevin Warsh. Analysts note that Warsh's reputation as a "policy hawk" during his previous term as Fed governor suggests he may be slow to cut interest rates. ING analysts stated in a client note that the dollar is looking healthier, attributing the unwinding of the recent USD plunge to Warsh's nomination.
Upcoming U.S. macroeconomic data releases, particularly the nonfarm payrolls report, could further influence the dollar's recovery. Although this report was initially scheduled for February 6, it has been delayed due to a partial federal government shutdown. Analysts expect around 80,000 payrolls and unchanged unemployment at 4.4%, which could stabilize or even boost the dollar's position.
Matthew Ryan, head of market strategy, commented that the USD bounce has potential for further gains. While Warsh has recently aligned with Trump in calling for a lower fed funds rate, his past as a hawk implies he may not advocate for aggressive cuts, unlike some of his contemporaries. This suggests that the dollar's strength could persist, placing further pressure on Bitcoin and other cryptocurrencies.
In summary, the combination of a strengthening dollar and potential financial tightening may impact Bitcoin's recovery efforts. As the dollar remains buoyant, Bitcoin investors should brace for continued volatility. The resilience of the dollar index signals challenges ahead for cryptocurrencies, making the path to recovery for Bitcoin even more uncertain.