Bad news for bitcoin? Dollar may rise again

Slecht nieuws voor bitcoin? Dollar kan weer verder stijgen

The US dollar (USD) has endured quite a correction in recent weeks. The world reserve currency has fallen by about 8% against the euro. But meanwhile, the war in Ukraine is still not over, the economic situation worldwide is dire and there after the problems with crypto exchanges a lot of uncertainty in crypto land. The dollar has also started to rise again against the euro today. In front of investors in cryptocurrencies maybe this is the key question: is been the top for the dollar, or going he rise further?

USD has had a correction

Last July I wrote that the dollar has broken out against the euro. As a result, the euro could see a sharp correction of almost 17% against the dollar. But now the price has returned all the way back to the point of the breakout. So there is still a significant chance that the price will drop by about 17 percent.

So far, the price seems to be retesting the trendline that broke last summer. The renowned technical analyst Alessio Rastani explains better than me that a price likes to test a breakout by going back to the trendline. In the meantime, little has changed in the fundamental principles I personally have linked to the rising dollar. So it is a good start for a further rising dollar, and therefore possibly also for declining crypto-assets.

The dollar has still broken out to the downside, with few signs pointing to a clear top. Source: EURUSD on Tradingview.

Cause for declining dollar still absent

It is often dangerous to trade because there is not yet a cause for a fall or rise. Markets are often irrational, which is why prices often do not do what is logical and obvious. However, it is important to check whether there is a fundamental reason for an increase or decrease. This can indicate whether a trend has solid ground under its feet or not. In the longer term, in my opinion, hard facts often outweigh unexpected price movements that have no clear cause.

The strong rise of the dollar against the euro is probably largely caused by the US Federal Reserve better able to set interest rates higher than the ECB in Europe. The European central bank is still limited in this because there are so many different EU countries with a lot of debt. In addition, the EU is still dealing with the consequences of the war in Ukraine. Should energy become even more expensive next year if the EU and Russia continue to refuse to trade with each other, it is likely that these prices will remain high.

Last September I wrote that the United States can fight inflation much better because inflation there would reach 30% due to high demand. In the Eurozone, high demand is only 15% of the cause. The sky-high energy prices are said to be no less than 47% of the cause. If the conflict with Russia is not resolved quickly, this problem will therefore remain for a while. It could be years before a new energy infrastructure can take over from Russian oil and gas.

Meanwhile, Goldman Sachs called a similar argument. The investment bank compared today’s high inflation to that of the 1970s. In that decade, the dollar only started to fall when the Federal Reserve started to loosen policy.

Crypto is and will always be a hedge

It remains important to keep in mind that the economy is a complex place that you can never understand well enough. Should something unexpected happen, it could invalidate this theory.

Should the dollar start falling again, that could be good news for cryptocurrencies like bitcoin (BTC). The two are basically still inversely correlated. Crypto-assets remain a hedge against a declining dollar, and it is always important to keep an open mind to new information.


Disclaimer: The opinions and statements shared in this column are those of the author only and do not necessarily reflect or represent the opinions and views of Crypto Insiders. The information in this article does not constitute financial advice.