U.S. Dollar Sees Significant Rise as Bitcoin Faces Drop Amidst Halving Event and High Interest Rates
Summary:
The U.S. dollar experiences its best upward trend in nearly five days since February 2023, while Bitcoin drops due to anticipated high interest rates and market fluctuations ahead of its April 20 halving. The surge in the dollar's value is attributed to sustained high interest rates, attracting more foreign investors. Meanwhile, Bitcoin's value falls, displaying the historically inverse relationship with the dollar. The rising strength of the U.S. dollar also impacts the Crypto Fear and Greed Index, leading to a drop by 11 points since April 10.
The American dollar is experiencing a remarkable upward trend, its best in nearly five days dating back to February 2023. Meanwhile, Bitcoin (BTC) has tumbled during this period due to anticipated high interest rates and market fluctuations associated with its April 20 halving event. Experts such as The Kobeissi Letter credit steady high interest rates as the main driver for the dollar's recent success.
A mere month ago, financial markets were expecting the Federal Reserve to commence reductions from June. The current situation, however, predicts sustained high rates. Such an environment usually lures foreign investors to benefit from bigger returns on bonds and term deposits, thereby elevating the dollar's demand.
The Bloomberg Dollar Spot Index (BBDXY), which gauges the performance of 10 globally recognized currencies against the United States dollar, has seen a nearly 2% rise over the prior five trading days, its maximal surge in over a year. Currently, the BBDXY places the U.S. dollar index at 106.34, an upward shift from 105.28 just five days ago. This change signifies the dollar's growth against the nine other major currencies in the index, including the Euro, British pound, and Japanese yen.
On the other hand, Bitcoin has undergone a 9% price reduction over the past five days, dropping to $63,936, according to data from CoinMarketCap. Notwithstanding inconsistent correlation, there has been an inverse relationship between the dollar and Bitcoin historically.
Jerome Powell, the Federal Reserve Chair, revealed on April 16 that America's inflation rate, currently at 3.5%, is not progressing towards the central bank's 2% objective. Consequently, reaching this target is likely to take longer than previously thought. Simultaneously, trader Justin Spittler cautioned that every time the dollar has achieved "overbought levels," a significant correction has rapidly ensued.
Typically, decreasing dollar strength triggers an influx of demand for more unstable assets such as Bitcoin. Complicating matters, however, is the Bitcoin halving event slated for April 20, which cuts the quantity of BTC mineable in a single block by 50%.
In contrast to the last halving event in 2020, the upcoming halving sees crypto investors displaying more trust in potentially risky crypto assets, per Bitcoin’s dominant chart. Just three days prior to the 2020 halving, Bitcoin's dominance, or its market cap measured against all other cryptocurrencies, was approximately 15% higher than it is now. Compared to 2020, the U.S. dollar is currently 6% stronger. According to CoinStats, Bitcoin's current dominance is at 52%.
The rise in the U.S. dollar over the previous five days has also led to a 11 point drop in the Crypto Fear and Greed Index, a measure of crypto market sentiment since April 10.
This news does not offer investment guidance or suggestions. Trading and investing involve risks, hence, individuals should perform their own risk evaluations before making any financial decisions.
Published At
4/17/2024 7:21:39 AM
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