Tendency
Bitcoin is languishing at the important support level of $64,000. As the dollar continues to make hay while rates remain high, how will Bitcoin attract the liquidity needed to break out of its current prison?
The US dollar tends to rise
The US dollar has been on an upward trend since July 2023. An interest rate of 5%, reached in the fastest time frame in American economic history, has recently put a damper on Bitcoin and the cryptocurrency market. cryptography. Of course, there are other headwinds currently that are perhaps contributing even more to this situation, but a strong dollar has its own drag on prices.
The Federal Reserve has indicated that it will keep this high interest rate as long as necessary to keep inflation in check, and in this type of environment, Bitcoin isn't really going to fly.
Global liquidity cycle on the rise
Source : Financial Times (Capital transfrontalier)
That said, it's not just about the Federal Reserve, as the global liquidity cycle (chart) shows. Other central banks, worried about the state of their economies, are starting to cut rates, and whether it's one or two rate cuts this year, the U.S. probably doesn't have a no choice but to start.
Effect of a Strong Dollar on Bitcoin
The question also needs to be asked: “How much does a strong dollar affect Bitcoin?” As noted above, a higher dollar suggests that asset prices should be lower, but if we look at the history of the DXY, we can see that it has been in an upward trend since 2008, i.e. just before the advent of Bitcoin; but where DXY is only up 48% over that time compared to a basket of other fiat currencies, $BTC is up several hundred thousand percent against the dollar.
Bitcoin against debasement and inflation
Bitcoin is just about the strongest monetary asset in the world, with a supply of just 21 million, while the US dollar is an unbacked paper currency and is currently printed to the tune of around $1 trillion every the 100 days.
This currency depreciation, combined with inflation, reduces the wealth of American citizens by approximately 12% per year. With banks offering just over 5% for savings accounts, there is literally no chance of citizens keeping their heads above water, and millions will be added to the poverty pile over the next few years.
The only chance the poor and middle classes have is to do the same as the rich and invest in durable assets like gold, silver, Bitcoin and disruptive tech stocks. As more money is printed in order to manage debt, the value of assets must increase.
Disclaimer: This article is for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
