- Bitcoin’s recently bull run is attributed to the weakening dollar
- Bitcoin and gold enter a consolidation phase as dollar surges higher
- A strong U.S. Dollar can reverse the momentum of Bitcoin
Bitcoin News Today – The price of gold and Bitcoin (BTC) plunged as the USD Index rallied. This has left many analysts speculating if a strong dollar will slow the traction of Bitcoin. Two days ago, the price of Bitcoin plunged by more than 3 percent from $11,880 to about $11,500 on Coinbase – one of the largest trading platforms in the world.
Coincidentally, the USD Index began to rebound from its 4-month downturn. As the US dollar surged by 1.3 percent from $92.28 to $98.20, gold, Bitcoin, and other top digital currencies fell in tandem. This inverse correlation between Bitcoin and gold might suggest that the weakening dollar is the catalyst for the recent BTC price rally.
Bitcoin (BTC) Price Today – BTC / USD
A Strong USD Might Dampen the Bullish Momentum of Bitcoin
Since Bitcoin plunged to the lows of $3,800 in March this year, analysts have attributed the price surge of the digital currency to the declining dollar. Researchers at Kraken exchange said:
“Behind the surge, Bitcoin’s correlation with #gold strengthened to a 1-year high of 0.93. This occurred as markets turned to safe-haven assets amid an uptick in COVID cases, increased government spending, mixed corporate earnings, inflation fears, and a weakening US dollar.”
Contrarily, the chances of a BTC consolidation phase could increase when the USD reverses and starts to rally. Over the past two days, as the USD Index surged, the price of gold also plunged by over 3.5 percent. Gold has had some strong traction over the past few weeks, increasing significantly due to the rising uncertainty around the world economy.
A digital currency trader, Scott Melker – noted that the inverse relationship between the USD and Bitcoin is more compelling than its recent correlation with the stock market. He said:
“Bitcoin’s inverse relationship with the dollar is far more compelling than the idea that it is correlated with the stock market.”
Where Would the U.S. Dollar Go Next?
The recovery of the USD is causing the uptrend of gold to weaken, according to Michael Hewson. He said:
“The rebound in the US dollar has also sparked a fresh bout of weakness in gold prices which sold off sharply and are now testing support at $1,920 an ounce, and the renewed uncertainty over the pace of further monetary stimulus from the Federal Reserve.”
According to data from Skew, gold and Bitcoin saw a newfound correlation a few weeks ago. If the price of Bitcoin and gold continue to move in the same pattern, the chances of the strengthening USD causing a BTC dip rises.