Last Friday, the digital currency set its latest high, above $ 41,800, but since then it has traded in a negative trend and tonight it completes a 20% drop to a price level of about $ 33,000. About $ 30,500 was the lowest rate tonight, reflecting a 28% drop from the peak. The currency price crash comes along with a jump in the dollar index (DXY), is this a correction after a jump or a forecast towards 2021?
The DXY, following the strength of the dollar relative to the basket of foreign currencies, climbed tonight and peaked at 90.7 points, a record high of the past two weeks. On January 6, the index recorded a 33-month low, closing at a total of 89.21 points. Since the market crash in March, Bitcoin and the index have moved in opposite directions and each time the DXY has recovered slightly Bitcoin has corrected accordingly.
‘The value of bitcoin grows as inflation expectations rise. At the same time, the dollar weakened to a perennial low, resulting in an inverted fit between Bitcoin and the government-backed Fiat currency, the research body Kaiko noted during December. The price of Bitcoin fell from $ 12,000 to $ 10,000 in early September, during which the currency shuffled, while the dollar jumped from 91.75 to 94.75 points. A similar operation also took place in June 2020.
The cartographic currency began to soar during October, when foreign exchange markets began to sell dollars in anticipation of further significant quantitative easing in the United States. At the same time, a steep decline in the DXY also began, which accompanied the meteoric rise of the currency from $ 15,000 to over $ 41,000 in just two months.
The reverse correlation is not surprising, given that listed companies like MicroStrategy (NYSE: MS) are buying Bitcoin to maintain their dollar cash value. ‘What we’re trying to do is keep our capital. The purchasing power of cash is declining rapidly, “said MS CEO Michael Sailor. Bitcoin is not the only asset that falls when the dollar recovers. Gold, the classic inflation hedge, fell to $ 1,817, peaking at $ 2,000.
The recent jump in the dollar appears to be fueled by a rise in U.S. Treasury yields. Analysts predict that interest rates on ten-year US bonds will reach 2% by the end of 2021, noting that “a similar outburst of rage is a real risk.” The same bond passed the 1% threshold last week against the backdrop of the election results in Georgia that led to democratic control of the Senate. (To the full article)
The question that needs to be asked is whether the jump in the price of bitcoin is due to a belief in the technology and the new “monetary” system that it will create, or is it a momentary “hype” resulting from a sharp fall in the dollar exchange rate? We will know the answer at the end of the year, when the interest rate on bonds is expected to rise and the volume of the purchase plan is expected to fall, which will strengthen the dollar even further. If Bitcoin does not succeed in breaking away from the negative correlation against the dollar, it is likely to have a year saturated with wars against the strongest economy in the world.
How is the US administration expected to respond to Chinese control of Bitcoin? “Immediately there is no China” – for many this caption stamped on products from the Asian superpower has become a language of imitation, a mediocre and disintegrating commodity, but the hot commodity of the moment, some of you may be surprised to discover, is also immediately no China: Bitcoin. (To the full article)
Eli Mizrah, founder and CEO of Silver Castel, is optimistic about the price of Bitcoin in 2021. “The increases in the current year are due to the inflow of institutional funds to buy the digital currency. We are monitoring the volume of large wallets operating in the field, this weight has increased. This means that large institutional or investment managers’ money has entered the crypto industry. (For the full interview)
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