As the Dollar Slides, Bitcoin Prices Are Rising


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Author: Michael Stern

As the value of the U.S. dollar slides, things priced in the currency are beginning to show the effect. Prices are rising, and that includes the price of Bitcoin.

The price of Bitcoin went up a startling 13 percent on July 27th, the biggest gain the cryptocurrency has seen in almost three months. As the price hit a new 2020 high of $11,180, it soared past the highs set in February, before the sell-off induced by the COVID-19 pandemic.

Joe DiPasquale, Chief Executive Officer of BitBull Capital, has said that this latest upward movement appears to be “in sync” with gold. The price of gold has climbed in recent days, hitting a new record. Many digital-asset analysts and investors see bitcoin as a hedge against inflation as well, similar to the way investors in traditional markets see gold. DiPasquale went on to say that “Bitcoin has sprung into action.”

What has happened in the crypto market in the last few days is remarkable. It was only a few days ago that investors in the oldest, and largest, cryptocurrency were despairing. Bitcoin had been moving in a limited range between $9,000 and $10,000 for the last couple of months.

The Price Increase is Welcome

For Bitcoin bulls, the movement in Bitcoin was welcome, especially since the movement was in a positive direction, not negative. The gain came on the back of strong trading volume. Trading volumes were higher than they have been since the first week of June. The trend seems to be clear. Bitcoin is headed higher.

On a year-to-date basis, Bitcoin is up 57 percent. This increase represents double the YTD increase in gold prices, at 28 percent. The S & P 500 stock index for the same period is roughly flat.

Dollar’s Value is Falling

The United States dollar currency index is a gauge of the dollar’s value vs a basket of other major currencies, including the euro and the Japanese Yen. The index has fallen for seven straight days. Goldman Sachs, a respected Wall Street firm, is predicting that the U.S. currency could lose another 5 percent over the next year.

Mati Greenspan, the founder of Quantum Economics, sees the dollar eroding, and eroding quickly, so much so that investors are starting to take notice. In the opinion of Mr. Greenspan, “It is plain to see that people are getting out of the U.S. currency, and getting out as fast as possible.”

Although this is not good for the prices of imported goods, it is very good for Bitcoin, as well as gold. The Monday edition of the WSJ (Wall Street Journal) suggests that a weakening dollar drives up the price of commodities that are invoiced in dollars.

With the number of COVID-19 cases on the rise, along with a death toll that now exceeds 650,00, investors are currently concerned that the global economy is showing signs of faltering. Senate Congressional Republicans have proposed a $1 trillion relief package following discussions with President Trump. This Republican proposal falls considerably short of a plan lead by the Democrats for a stimulus package of $3.5 trillion.

Jim Reid, a strategist for Deutsche Bank, in an earlier report says the Fed, which has expanded its balance sheet by about $3 trillion this year, may have to plow a further $12 trillion into the economy over the next few years.

The Fed Has a Meeting Scheduled Later this Week

The Federal Reserve is scheduled to meet later this week. A statement is due to be issued Wednesday. With current interest rates at or near zero, no significant changes in policy are expected. However, investors have noted that any sell-off of stocks in the U.S. markets might be the thing that will provoke the central bank to respond.

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Michael Stern is a calculated risk taker with deep technical insight into digital currency and the development of strategic strategies.