Calm after the crash – Bitcoin (BTC) is holding above $46,000 after the storm that took it down to $50,000. New analysis tends to show that the dollar, not just over-leveraged positions in the derivatives markets, is to blame for the crash.
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Side by side: Bitcoin surrounded by gold and the dollar
Bitcoin is nearing $45,000 on Bitfinex today, September 8, 2021. The bulls manage to defend overall, however, the $46,000 as support. Bitcoin is trading at $46,322 at the time of writing, with a daily mini-loss of 0.78%.
Analyst Yashu Gola shared his analysis of Bitcoin’s flash crash on Cointelegraph, reconciling Bitcoin’s price fluctuations with those of 2 assets that have historically correlated positively or negatively with Bitcoin. Yesterday’s crash, September 7, 2021, coincided with the largest one-month daily drop in the price of gold, with XAU/USD falling below $1,800. This collapse in the Bitcoin price also coincided with a sharp rise in the US Dollar Index (DXY).
How can we explain this relatively good performance of the dollar? The DXY benefited from rising U.S. Treasury yields ahead of this week’s government debt sale, which includes $58 billion in three-year bonds, $38 billion in 10-year bonds and $24 billion in 30-year bonds. The yield on the 10-year U.S. Treasury bond hit 1.377% yesterday, up from 1.32% after the disappointing U.S. nonfarm payrolls report on September 3, 2021.
Bitcoin at $100,000: is the dollar giving the green light?
Is the US dollar likely to overshadow Bitcoin by the end of 2021, hampering the prospects of a 6-figure Bitcoin? Despite the rise in bond yields, they remain below the core inflation rate at 5.4% in July 2021. So assets known as safe havens like gold and Bitcoin remain the most attractive hedges against rising consumer prices for now.
And what about the future? The US Federal Reserve (FED) plans to begin a gradual reduction of its $120 billion per month asset purchase facility at the end of 2021. Some analysts believe that that bond yields will continue to rise in favour of the US dollar.
The Delta variant of covid-19, however, continues to pose a threat to a recovery in the economy. As a result, the FED may be forced to maintain its expensive bond-buying program, to the detriment of bond yields and the dollar.
The collapse of the Bitcoin price should not hide the main point: the adoption of Bitcoin is growing, as evidenced by the Swiss branch of a Spanish banking giant that has decided to offer a Bitcoin account to its customers.
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