Crypto enthusiasts are keeping a close eye on the rising strength of the U.S. Dollar, which experts believe could put a lid on digital asset prices amidst a shift in market sentiment. A recent report from QCP Markets delves into the impact of the dollar's momentum on the crypto landscape.

The U.S. Dollar is once again on the upswing, exerting pressure on risk assets, including cryptocurrencies. The Swedish Riksbank has lowered interest rates from 4.00% to 3.75%, following the Swiss National Bank's (SNB) earlier cut in March. The European Central Bank (ECB) is also expected to reduce rates in June. According to the report, inflation and macroeconomic factors may prompt other central banks to wait for the Federal Reserve to initiate rate cuts before following suit. The divergence between the U.S. and other countries is another factor contributing to the dollar's strength.

Macroeconomic Factors Shaping Crypto Prices

The QCP report highlights several macroeconomic factors that could hinder a bullish market run as crypto prices have declined in recent weeks. Institutional investors and major banks continue to speculate on two rate cuts this year, with the first potentially occurring as early as September. However, the Federal Reserve currently maintains unchanged interest rates, emphasizing the need to rein in inflation.

Rate cuts could potentially boost crypto prices as investors may shift funds back into riskier assets. Last year's interest rate hikes led to investors moving funds out of risky assets, negatively impacting market sentiments. At the time of writing, Bitcoin trades at $61,253, a 2% decrease in the last 24 hours. This downward trend is reflected across the broader crypto market, with Ethereum, Solana, Ripple, and Dogecoin all posting lower prices.

Reduced Inflows in Spot Bitcoin ETFs

Analysts at QCP also noted a decline in inflows to spot Bitcoin ETFs. While the market saw increased flows last Friday, recent events have triggered a pullback from investors. The firm suggests that topside strategies may provide favorable risk-reward ratios for users. Bitcoin ETFs were a dominant industry narrative in Q1, with the asset price soaring to a new all-time high.