The US dollar is surging, and that could spell trouble for Bitcoin and Wall Street. The US Dollar Index (DXY) reached an 18-month high near 102.56 on Monday, while Bitcoin struggled around $83,000 and the Nasdaq slipped.

Behind the dollar’s rally is a growing expectation that the Federal Reserve will raise interest rates again this year. Higher rates make dollar-based investments more attractive, potentially pulling money away from riskier markets.

US Dollar Index weekly chart. Source: TradingView

Why a Stronger Dollar Could Hurt Bitcoin and Stocks

Bitcoin pays no interest. When US government bonds offer yields above 5%, investors have more reason to move money into safer assets.

A stronger dollar can also reduce demand for speculative investments, particularly cryptocurrencies and high-growth technology stocks.

The pressure is already visible. Bitcoin lost nearly 3% over the past week, while Ethereum suffered larger losses. Meanwhile, the S&P 500 and Nasdaq slipped on Monday, with higher oil prices adding pressure.

The 10-year Treasury yield touched 5.35% on October 8, its highest in 24 years. Investors also moved $166 billion into money-market funds that week.

Could Wednesday’s Inflation Report Trigger Another Sell-Off?

The Fed’s benchmark rate currently stands at 3.75%–4%. Futures pricing indicates roughly an 87% chance of another hike by December, although most traders expect no change in October.

Cleveland Fed President Beth Hammack warned that persistent inflation could become increasingly difficult to control.

“With each passing month, persistently elevated inflation raises the risks of an inflationary mindset becoming entrenched in the economy,” Hammack stated.

Wednesday’s CPI report could determine the next market move. Economists expect annual inflation to reach 3.7%, up from 3.4%, while core prices are forecast to rise 0.2% monthly.

September US CPI forecasts. Source: CME FedWatch

Higher-than-expected inflation could strengthen the dollar further, adding selling pressure to Bitcoin and stocks. Softer inflation could offer some relief by reducing expectations of additional rate hikes.

Even Goldman Sachs, which upgraded global equities on Monday, identified higher interest rates as a key near-term risk.

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