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Bitcoin Risks Deeper Drop if Dollar Rebounds

Written by:
Aeon Flux
Published on:
20 August 2020
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Aug 20, 2020 at 10:49 UTCUpdated Aug 20, 2020 at 10:53 UTC

https://www.shutterstock.com/image-photo/growing-money-investments-close-american-banknote-1120788869?src=ps4WqqR3ypqKNchRuDWVnQ-1-61

(Shutterstock)

Bitcoin’s price pullback may worsen as the U.S. dollar shows signs of life on the back of the newly-released minutes from July’s Federal Reserve meeting.

  • The dollar index, which tracks the greenback’s value against that of other reserve currencies, has jumped 1% to 93.000 in the past 24 hours – the biggest single-day rise in two months.
  • USD has picked up on the news the Fed is not planning on implementing controversial yield curve controls on bonds – something markets had been anticipating.
  • The correlation between bitcoin and the USD has been historically weak but has picked up in the past month as investors look for alternative safe-haven assets.

2020-08-20-11-41-07(Tradingview)

  • CoinDesk data shows bitcoin rising from $9,000 to $12,400 in the four weeks up to Aug. 17 just as the dollar index declined from 97 to 92.
  • But in the past week and in the face of a strengthening dollar, bitcoin has fallen to around 11,780 – down 5% from the recent high of $12,400 it reached earlier this week.
  • Continued recovery in the U.S. dollar could yield further losses for bitcoin but a sustained dollar rebound still looks unlikely – interest rates will remain at rock bottom to stimulate the economy, increasing the chances that the Fed might be forced to more radical monetary measures.

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