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$BTC: A Weaker U.S. Dollar Allows Bitcoin and Rest of the Crypto Market to Move Higher

source-logo  cryptoglobe.com 23 August 2022 20:47, UTC

Although the U.S. Dollar Index (DXY) surged to 109.22 — its highest level in over two decades — earlier today, since then it has dropped to 108.60, thereby allowing stocks and crypto to get some badly needed oxygen.

Wikipedia says the U.S. Dollar Index” (DXY)—which is designed, maintained, and published by ICE (Intercontinental Exchange, Inc.)—is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies. These other currencies are EUR, GBP, JPY, CAD, SEK, and CHF.

According to data by MarketWatch, the DXY rally that started on August 11 has taken it from 105.09 to 109.22 (which it hit earlier today), its highest level since June 2002. Stocks, gold, and crypto are thankful that since then DXY has dropped to 108.61 (as of 6:42 p.m. UTC on August 23).

Source: MarketWatch

Possible double top forming for the Dollar Index! pic.twitter.com/N1OWJD2R80

— Lark Davis (@TheCryptoLark) August 23, 2022

Of course, as crypto analyst Dylan LeClair pointed out today, a surging DXY affects the price of Bitcoin (and other cryptoassets) in the short term and not in the long term:

A strengthening USD in the near term is no slight to bitcoin's long term value proposition. To be clear, I never said otherwise.

People seem upset with me sharing my honest thoughts about the state of things over the short term. pic.twitter.com/lqyztsI1ay

— Dylan LeClair 🟠 (@DylanLeClair_) August 23, 2022

Regarding Bitcoin’s short-term price action, pseudonymous crypto analyst “Altcoin Sherpa” had this to say:

$BTC: Still the same plan. I think this is the short term low (we still might see a spike below in the 20ks) but I dont see us closing down there on higher time frames. I think a 23k move is coming. #Bitcoin pic.twitter.com/nj0FLF38qZ

— Altcoin Sherpa (@AltcoinSherpa) August 23, 2022

As for Bitcoin’s long-term prospects, Gabor Gurbacs, who is the director of digital assets strategy at Market Vector Indexes (a wholly-owned subsidiary of global investment manager VanEck), seems to believe that over time will reach at least 50% of that of gold, i.e. get to over $5.7 trillion, which suggests a 13X upside potential:

Bitcoin’s most important competition is not with other cryptocurrencies: It’s with gold. Gold market cap is $11.4 Trillion and Bitcoin market cap is $0.4 Trillion. I think Bitcoin can take 50%+ market share from gold over time. There will be more trading between gold & Bitcoin.

— Gabor Gurbacs (@gaborgurbacs) August 23, 2022

The main macro factor behind the jitteriness felt by global markets in the past one week is the concern that Fed Chair Powell might sound quite hawkish at this Friday’s speech, which could suggest that in September the Fed will increase interest rates by at least 0.75% in an attempt to control raging inflation in the U.S.

The 2022 Economic Policy Symposium, “Reassessing Constraints on the Economy and Policy,” is being held August 25-27 in Jackson Hole, Wyoming. This annual symposium is hosted by the Federal Reserve Bank of Kansas City, and Fed Chair Powell is one of the attendees.

Robert Cantwell, portfolio manager at Upholdings, told CNBC:

When you see the market right now dropping down like this, this is the market saying the Fed has to be more aggressive to slow the economy down further if they want to bring inflation back down.

Image Credit

Featured Image via Pixabay

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