The price of Bitcoin surged above the $90,000 mark on Wednesday, extending a rebound from last week’s sharp sell-off.
The crypto asset reached an intraday high of $90,428 before experiencing a minor retracement, trading around $89,647 at the time of reporting.
Bitcoin price rallied after reports of the US dollar crashing spread across the market. Recent data show that the US dollar has fallen to its lowest level in four years, raising concerns about the strength of the world’s dominant reserve currency.
As the dollar weakens, market players are beginning to shift attention to alternative assets such as precious metals and digital currencies, including BTC, which is increasingly viewed as a potential hedge against rising inflation and currency depreciation.
Also, the recent rally comes as investors await the Federal Open Market Committee (FOMC) rate decision later today. Analysts caution that while the rebound provides short-term relief, it does not resolve the broader structural pressures facing the crypto market amid a dense cluster of U.S. macroeconomic and policy risks.
According to QCP Capital’s January 28 Market Colour, Bitcoin’s recovery has alleviated immediate liquidation pressure but has not diminished the longer-term forces that keep downside protection firmly in place.
Historically, a weakening U.S. dollar tends to support risk assets like Bitcoin by easing global financial conditions and boosting liquidity. Cointelegraph notes that BTC has often staged major breakouts in the months following sustained declines in the dollar index, particularly when the DXY falls below the 96 level.
Traders emphasize that Bitcoin bulls must maintain the $80,000–$84,000 support zone to prevent a deeper correction, with potential bear market targets as low as $58,000. On the upside, key resistance lies between $90,000 and $94,000, aligned with the 50-day and 100-day moving averages. Beyond that, a retest of the $98,000 psychological level—coinciding with the short-term holder cost basis—could be possible if buying momentum continues.
Market uncertainty is further fueled by the looming possibility of a second U.S. government shutdown on January 31. Polymarket data suggests a 76.5% probability of a shutdown if Congress fails to approve funding in time, although a $1.2 trillion funding package has already passed the House.
During the last major U.S. government shutdown, which lasted nearly 43 days ending in November, crypto markets experienced heightened volatility but avoided a full collapse. Delays in key economic data, such as jobs and inflation reports, made it harder for traders to price risk.
During that period, Bitcoin declined roughly 9%, falling from around $103,000 to $94,000, while altcoins dropped between 12% and 25% due to reduced liquidity.
Outlook
Bitcoin faces a critical test in the coming days as it navigates macroeconomic headwinds and potential U.S. policy disruptions. Sustaining support above $80,000–$84,000 remains crucial to avoiding deeper corrections, while a sustained move above $94,000 could signal renewed bullish momentum.
Traders are closely monitoring the FOMC decision, which could act as a catalyst for volatility. A dovish stance could further weaken the dollar and support BTC’s upside, whereas a hawkish move may trigger a temporary pullback. Additionally, the possibility of a U.S. government shutdown adds an element of political risk, potentially limiting liquidity and causing short-term price swings
However, traders remain cautious as political uncertainties and liquidity constraints continue to pose short-term downside risks for the broader crypto market.
