[DigitalToday reporter Jinju Hong (홍진주)] Bitcoin is facing short-term downside pressure as a stronger dollar coincides with weakness in the derivatives market. With the U.S. dollar index (DXY) rising to an 18-month high, short positions betting on bitcoin declines are increasing. Liquidations of long positions have also added to market caution.

On Oct. 12 (local time), blockchain media outlet U.Today reported that the recent rise in the dollar index is dampening investment sentiment toward risk assets, widening selling pressure in the bitcoin market. It said trading that bets on declines, especially in the derivatives market, is strengthening and weighing on short-term price moves.

Dollar strength can act as a negative factor for risk assets such as bitcoin. A rising dollar index can weaken investors' risk appetite and affect flows of funds into the crypto market. This time, concerns are growing about bitcoin's short-term outlook as dollar strength coincides with bearish bets in the derivatives market.

In the derivatives market, the expansion of short positions and the liquidation of long positions have emerged as key variables. Short positions are trades that bet on price declines, and an increase in such positions shows market participants are placing more weight on the possibility of further falls.

Liquidations of long positions can also increase downside pressure. Investors using leverage to bet on price rises can be forced to liquidate positions due to mounting losses or a lack of margin, which can generate additional sell orders. If the process triggers a chain reaction in which price falls lead to further liquidations, short-term volatility could increase further.

Still, weakness in the derivatives market does not necessarily lead to a long-term decline. If dollar strength eases and long-position liquidations subside, selling pressure could soften. Conversely, if the dollar index stays at a high level and bearish bets continue, bitcoin's rebound could be limited.

The market is seeing analysis that it is necessary for now to watch the direction of the dollar index and changes in positions in the derivatives market. With macroeconomic factors and leveraged trading affecting prices at the same time, bitcoin's short-term moves are expected to depend not only on spot supply and demand but also on whether dollar strength persists and on the scale of liquidations.