Bitcoin Price in Focus as Dollar May Fall 10% on Fed Rate Cuts

Key Insights:

• Bitcoin price is in focus as the U.S. dollar could drop 10% on deeper Fed cuts.
• Markets price two cuts, with a third seen as possible.
• BTC price may benefit from a weaker dollar.

State Street strategists warned in Miami on Feb. 10 that the U.S. dollar could fall by as much as 10% if the Federal Reserve cut rates more aggressively than markets expect. Lee Ferridge said investors treated two cuts as a base case but saw room for a third. The warning surfaced as traders assessed how policy shifts under a potential new Fed chair could reshape capital flows.

Bitcoin price moved into focus because dollar weakness often coincides with stronger demand for risk assets. When the greenback falls, global liquidity conditions tend to loosen, and investors rotate into alternatives. This macro link framed the latest debate over BTC price direction for 2026.

Dollar Weakness and Immediate Market Reaction

Walter Bloomberg reported that Ferridge projected a 10% dollar decline this year if financial conditions loosen further. Traders currently price two rate reductions, with a third viewed as possible under sustained political pressure.

That reaction followed expectations that Kevin Warsh, U.S. President Donald Trump’s nominee to replace Jerome Powell, could favor faster easing.

Source: X

CME Group’s FedWatch Tool showed markets aligned with a cautious path, with the first move expected in June. The Federal Reserve’s current target range stood at 3.50%–3.75%, anchoring short-term rate assumptions.

This shift occurred because lower yields reduce the appeal of dollar-denominated assets for foreign investors.

June’s FOMC Meeting is Likely | Source: CME FedWatch

Bloomberg data showed the U.S. Dollar Index recently touched a four-year low. A weaker currency historically eased financial conditions and encouraged cross-border capital rotation. That reaction mirrored prior cycles where liquidity expansion coincided with rising bitcoin price momentum.

Grayscale analysts stated that bitcoin traded more like a growth asset than digital gold in recent quarters. That classification tied bitcoin price behavior to macro liquidity rather than defensive flows. As rate differentials narrow, overseas investors often increase currency hedging, which amplifies dollar selling pressure.

Bitcoin Price Chart | Source: CoinMarketCap

Lower U.S. interest rates tend to compress real yields, and compressed yields often redirect capital toward higher-beta assets. This dynamic supported bitcoin price rallies during earlier dollar downturns. However, the relationship remained inconsistent over shorter time frames.

Recent market structure showed profit-taking and positioning shifts tempered the impact of currency moves. Traders adjusted exposure as uncertainty around monetary policy persisted. That reaction suggested Bitcoin price did not mechanically track every dip in the dollar.

Policy Leadership and Product Logic

Bloomberg reported that Kevin Warsh’s potential leadership at the Federal Reserve could tilt policy toward faster easing. Investors viewed that prospect as a structural factor for currency markets. If confirmed, a more dovish stance would likely accelerate hedging flows and alter global portfolio allocation.

Lower rates typically reduce funding costs and expand liquidity channels into speculative markets. Bitcoin price tends to respond when excess liquidity enters risk assets. This effect occurs because digital assets trade continuously and absorb capital shifts quickly.

Institutional allocators also reassess currency exposure when hedging costs rise. Selling dollars to protect foreign returns adds incremental pressure on the exchange rate. That feedback loop can indirectly support BTC price by weakening the benchmark currency used for global trade settlement.

Still, broader risk sentiment remains decisive. Equity volatility, geopolitical tensions, and regulatory signals can override currency effects. Investors, therefore, weighed macro easing against positioning and profit dynamics.

Markets now watch the June Federal Open Market Committee meeting as the next inflection point. If policymakers confirmed the first rate cut, traders would reassess the probability of a third move later in the year. Bitcoin price direction will likely hinge on whether liquidity expansion accelerates alongside renewed dollar weakness.

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