Dollar Dominance Hits Crypto Market as Fed Rate Hike Becomes Increasingly Likely

The Bitcoin price and the broader crypto market are under pressure as the US dollar continues to gain momentum. Despite a marginal 1.36% uptick in the total market capitalization, the market is facing a severe sell-off amid strengthening dollar dominance.

Recently, the Dollar Index (DXY) surged to its highest level in over two months. This boost comes on the heels of strong US jobs data, which boosted expectations of the Federal Reserve raising interest rates later this year. However, it's important to highlight that the market is overwhelmingly expecting the Fed to leave interest rates unchanged at the next FOMC meeting on June 17, according to the CME's FedWatch tool.

As Bitcoin and the dollar are inversely proportional, the latest surge in the DXY has acted as a negative catalyst for the price of Bitcoin and most other cryptocurrencies. This trend has also raised growing concerns over the potential direction of the global crypto market.

Bitcoin and altcoins drop as DXY hits 2-month high

As per the latest findings, the Dollar Index has hit a 2-month high, closing above 100. This sentiment has extended into Monday, with the DXY hitting an intraday high of 100.174. The level marks the strongest since April 6, 2026. 

Financial writer Mike Zaccardi shared an X post, stating: “Dollar Index was above 100 last night... near the top-end of a very tight range over the last 13 months.”

It is worth mentioning that the rise in the Dollar Index is driven by the stronger-than-expected US jobs data. Reportedly, the US saw an addition of a massive 172,000 new jobs in May. This far exceeded the expected 85,000. Also, the unemployment rate has remained unchanged at 4.3%.

Interestingly, this report sparked speculations of a possible Fed rate hike, which in turn turned bearish for the Bitcoin price as well as the overall crypto market. 

Although we've seen a small uptick in the top crypto assets to start of the week, the crypto market remains under severe pressure. 

How does US dollar dominance impact BTC?

Usually, US dollar dominance is a big challenge for the crypto market, especially the Bitcoin price. When the dollar gains strength, investors move away from risky assets like BTC and park more money in safer investments like U.S. Treasuries. 

If the US dollar continues to gain strength, the Bitcoin price could see more losses. Veteran financial trader Matthew Dixon stated in a recent X post:

In this context, the stronger DXY is more threatening to the Bitcoin price as it comes ahead of the upcoming Fed meeting on June 17, 2026. Even though the odds of the interest rate remaining unchanged at 3.50-3.75% remains high, there are also speculations of a possible hike. These speculations could further push the Bitcoin price down, triggering a deeper crash.