- A strengthening dollar and growing uncertainty is rattling nerves and making investor more skittish to bet on nascent assets, including Bitcoin.
- Cryptocurrencies have struggled of late and continue to closely track risk assets, in particular tech stocks, as central banks globally attempt to combat high inflation by tightening monetary policy for the first time in over a decade.
As it turns out the dollar itself is an inflation hedge, and not Bitcoin, at least according to recent movements with the greenback now worth more than the euro and as Bitcoin slumps in the face of a rising dollar.
Falling below US$20,000 again on Tuesday, after enjoying its strongest week in over three months, a strengthening dollar and growing uncertainty is rattling nerves and making investor more skittish to bet on nascent assets, including Bitcoin.
Despite being a relatively immature asset class, Bitcoin has demonstrated that it is not immune to macro headwinds and is down by over 70% from its all-time-high from last November.
Ether, the world’s second most valuable cryptocurrency is down almost 80% from its all-time-high, despite a major software upgrade on the cards that could revolutionize Ether’s blockchain and make it more energy efficient.
Ahead of a key U.S. inflation print, due out later this week, investors are taking cover in cash until the policy outlook becomes more predictable, with divided traders adding to the volatility and just as many opinions as there are likely outcomes.
Last week’s U.S. jobs report revealed a strong U.S. labor market, fueling fears that the U.S. Federal Reserve will be emboldened to institute a fresh round of supersized rate hikes at its next policy meeting later this month.
Even the typically dovish Raphael Bostic of the Atlanta Federal Reserve has sung a different tune of late and suggested that the U.S. economy is sufficiently resilient to stomach further supersized rate hikes.
Even if the Consumer Price Index data for June comes in at less than May, it’s unlikely that robust flows can be expected back into cryptocurrencies, especially given the strength of the dollar ahead of inflation data.
Cryptocurrencies have struggled of late and continue to closely track risk assets, in particular tech stocks, as central banks globally attempt to combat high inflation by tightening monetary policy for the first time in over a decade.
A recent MLIV Pulse survey that ran in the first week of July suggests that over half of respondents expect Bitcoin to hit US$10,000, with the other half anticipating a recovery to US$30,000 and reflecting just how divided opinion continues to be in the cryptocurrency markets.
