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The dollar has continued to climb strongly over recent weeks. However, Bitcoin is also rallying. Will Bitcoin pull away now?
DXY rises - Bitcoin rises
With interest rates at possibly their highest point in the U.S., the dollar has been the cleanest shirt in the dirty laundry basket of the rest of the world’s fiat currencies. At over 105 in the Dollar Index (DXY) many outside the U.S. will have been buying the dollar.
Normally, in such a situation, risk assets such as Bitcoin would be pressured to the downside. But instead, Bitcoin is doing one of its most bullish moves by ignoring the dollar and is climbing.
Remarking on the strength of Bitcoin compared to the dollar, James V. Stratton, a research and data analyst, posted a chart on X detailing how last time the DXY was at 105 in March, Bitcoin was at $20,000, and the time before that in Q4 of 2022 Bitcoin was at $17,000.
#Bitcoin hit $27,000, while the #DXY is above 105.— James V. Straten (@jimmyvs24) September 18, 2023
The last time DXY was trading at 105 was March when #Bitcoin was trading at less than $20,000.
The time before that was Q4 2022, #Bitcoin was trading $17,000. pic.twitter.com/RQkmt68Uqf
This goes to show that as the DXY keeps revisiting the same point of 105, each time Bitcoin is stronger, and has climbed $10,000 against the DXY since the end of last year.
The Federal Reserve holds its next FOMC meeting on the 20 and 21 of September. At the meeting the Fed Chair Jerome Powell meets with the heads of all the Federal Reserve banks and they will decide whether to raise/drop the interest rate or keep it where it is.
Currently, according to the CME Fedwatch tool, the market is expecting rates to stay as they are, to the tune of a 99% certainty. Therefore, it might be imagined that if there is no interest rate hike then the dollar may well start to run out of steam. However, if Powell talks a particularly hawkish speech this may be enough to keep the dollar rising.
Bitcoin for the longer term
Be that as it may, Bitcoin is remaining buoyant. A currency that cannot be debased is a huge attraction for investors across the world. While fiat currencies are losing their value steadily to inflation and to central bank printing, Bitcoin is a bastion of financial freedom where wealth can grow over the longer time horizon.
More than 75% of Bitcoin holders are long term holders, given that they have not sold their Bitcoin for at least a year. With this kind of faith and belief in Bitcoin, and with the halving approaching next year, Bitcoin has the potential to go into overdrive in 2024.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.