What Happens To Bitcoin (BTC) If EUR/USD Declines Long Term?

What Happens To Bitcoin (BTC) If EUR/USD Declines Long Term?

Bitcoin (BTC) has once again climbed back above not just $7,000 but the key resistance at $7,131 which now seems to have become a temporary support. We have yet to see how the price reacts at this level but any move to the upside from here is very likely to be short-lived. The major trend remains bearish and that is where our focus should be. Many traders now seem convinced that BTC/USD has to decline at least down to $5,500 or the 200 Week MA before any further upside. To this extent there does not seem to be any divide in the crypto community. However, the real divide is on where the floor is.

Until recently, the majority of traders in this market were unanimously saying that the bear market is over and the price of Bitcoin (BTC) has bottomed. Back then, we warned that it may not be the case because most major indicators and factors were pointing to the contrary. At this point, there is not as many people who think the price has already bottomed and for good reason. Upcoming developments in this market will have more to do with what happens in the stock market and the currency market. The S&P 500 (SPX) has been in an uptrend and so had been the EUR/USD forex pair. However, it seems like things might soon change and the EUR/USD forex pair might decline further having just printed a triple top.

What happens to Bitcoin (BTC) if the EUR/USD forex pair declines long term? That is a very interesting question with a very interesting answer. A long-term decline in the EUR/USD forex pair would have to do with a rising strength of the US Dollar. Given that cryptocurrencies are predominantly paired to the US Dollar on most exchanges, it makes sense that a rise in the strength of the dollar would result in a lower price of Bitcoin (BTC) or other cryptocurrencies in terms of dollars. The real question to ask is, “Why would the dollar gain more strength?”

When investors realize that things are about to get bad in the US stock market, they cash out. This creates a strong demand for the dollar which increases its strength compared to other currencies. Some might argue that this time around, investors would be fearful of holding on to dollars due to a currency crisis that might kick in during or soon after the next stock market crash. That is true, but the immediate response of most investors is still sitting on cash. Everything costs cash and that is what people like to have during a crisis. Of course, for the savvy investor it is about using that cash to buy when there is blood on the streets. So, if the EUR/USD forex enters a long term downtrend, it would not be surprising to see a triple digit Bitcoin (BTC) price even if it does not stay there for long.  

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