Could The Dollar Rebound Sink Bitcoin?

Last Updated on 23 August 2020 by CryptoTips.eu


Jeroen Kok

Jeroen is one of the lead copywriters on Cryptotips.eu and discusses all recent events in the crypto market. This includes news updates, but also price analyzes and more. He developed his passion for cryptocurrency during the bull run in 2017. He has learned a lot since then. The combination of cryptocurrency and creative writing is perfect for Jeroen and an excellent way to share his knowledge with a wide audience. Find me on LinkedIn / [email protected]

Bitcoin, the best known cryptocurrency, has rallied some 20% in the past month after it broke through the 10,000 dollar level early May upon it’s halving. Ever since then, 12,400 $ has been its top for the year 2020, and many analysts are pointing to the US dollar’s weakness as a possible reason.

Earlier this week, the US dollar fell to a 27-month low just as stock markets worldwide climbed, and safe haven investments Gold and Bitcoin broke records. Bitcoin was, together with Tesla, crowned as the most popular investment in the US during the first half of the year so the rise of the cryptocurrency was therefore logic in a way.

Then on Friday, because of better than expected economic data coming out of the US, the dollar pulled back a bit and Gold fell below 2,000 dollar again. Bitcoin traded at around 11,600 dollars at the time of writing this article and seems to have trouble breaking the 12,500 dollar level.

Given that the dollar could thus be bottoming out and could shortly pick up steam again, many are wondering whether a dollar rebound could possibly sink Bitcoin and stop the possible crypto bullrun in its tracks altogether.

Correlation Dollar and Bitcoin

Historically speaking, correlation between Bitcoin and the USD has been rather weak but in the past month, as Wall Street investors looked for alternative safe haven assets and both Gold and Bitcoin were favored, the correlation has grown tighter. Whenever the US dollar would fall against a basket of other global currencies, such as the Euro, Bitcoin would rise.

Market commentators both in Europe and the US blame the White House’s poor handling of the COVID-19 pandemic for the Dollar’s weakness in recent weeks and months. Whereas the US dollar normally trades around 1,05 to 1,10 versus the Euro, the pair has been trending around 1,18 in recent weeks.

Others claim that the EU-27 successful agreement on a stimulus package for the member states, which was concluded around end of July, is the main cause for the Euro’s strength.

Altseason, Bitcoin growth and DeFi

Over in the crypto scene, commentators are not too worried about a possible pullback for Bitcoin as they state that both the Altseason (several altcoins like Cardano, Chainlink and VeChain have been growing spectacularly in recent weeks) and the popularity of DeFi (Decentralized Finance) are enough to keep crypto going. Just last week, US crypto-exchange giant Coinbase opened a loan service for its customers as well.

Even a possible stimulus deal between Democrats and Republicans in the US congress later this week, which could boost the US dollar, doesn’t seem to worry them. Let’s hope they are right.