For the past two days, Bitcoin has been in its beariest state in more than three months.
The cryptocurrency saw a significant sell-off on Wednesday that lasted until the next day’s New York meeting. Overall, the BTC / USD pair lost 12 percent of its value, falling from $ 11,950 to just $ 10,000.
The renewed bullish sentiment raised fears of a broad dip, with many predicting $ 9,600 as the next bearish target
Bitcoin posted its weakest weekly performance since May 18th. Source: TradingView.com
Bitcoin, however, was not an isolated incident. The abrupt collapse in cryptocurrency coincided with a similar move in traditional markets. US stocks also fell sharply on Thursday, with the tech-savvy Nasdaq Composite Index falling 5 percent to 11,458 – the sharpest one-day decline since June 11.
Safe haven gold also fell 3.11 percent from its weekly high of $ 1,992.56 an ounce.
However, one asset surged higher against the decline in the US stock, gold, and bitcoin markets: the US dollar.
The benchmark index of the greenback (TVC: DXY), which measures it against a basket of foreign currencies, soared from its two-year low earlier this week. The upswing contributed about 1.15 percent to its strength.
The US dollar index is recovering impressively on the basis of optimistic economic reports. Source: TradingView.com
So it seems that day traders – and not investors – are turning back to the dollar after analyzing the latest growth reports on the US economy. Earlier this week, the country’s production data showed improvement, and weekly adjusted jobless claims also fell.
Traders took this as an opportunity to sell their profitable positions in the risky and non-risky markets. As a result, capital moved back into the dollar, strengthening it accordingly.
Reuters Bitcoin Survey
The upswing in the US dollar market doesn’t appear to be long-term – at least according to the latest Reuters survey on the fiat currency.
The media mogul has 75 strategists to the future prospects of the US dollar for the year 2021 questioned . A majority of them said they expect the dollar to continue its slide as long as the US Federal Reserve keeps policy rates close to zero. In addition, the US Federal Reserve’s accommodative approach to higher inflation would increase said downside risk.
Lee Hardman, currency economist at MUFG, told Reuters:
„The Fed’s policies are the main reason the dollar has weakened so much in the past four or five months.“
“So they basically cut interest rates to zero, narrowed the yield differential in America versus the rest of the world, and that has obviously helped keep the dollar at such a strong level over the past few years that it is no longer the case today is. “
Meanwhile, scarce assets like bitcoin and gold are a nemesis for an abundant dollar. Investors hedge against these safe assets because they risk losing the value of their savings due to a rising consumer price index.
The same sentiment is helping gold and bitcoin rise exponentially from their lows in mid-March.
Reuters poll shows that the recent dollar recovery is more technical than fundamental. Its earnings left Bitcoin under the same upward skew as it was before this week’s slump.