The Impact of the Strong US Dollar on Bitcoin Price
Recently, the US dollar has surged to its highest level in over 30 days, causing concern among investors regarding the Chinese and Japanese economies. In response to the struggling economy, the Chinese central bank unexpectedly lowered interest rates, and the Japanese yen has reached its lowest level since November.
Vlucht naar de Amerikaanse dollar
There appears to be a small flight to the US dollar at present, influenced by concerns about the Chinese economy. China’s largest property developer, Country Garden, is unable to pay part of its debts for the first time in history. As a result, the combination of rising yields on US Treasury bonds and the weak Chinese economy is placing pressure on stock prices. The US dollar seems to benefit from this situation, as Chinese authorities need to stimulate the economy.
Additionally, the Japanese yen is showing weakness against the US dollar, having lost 10% against the dollar since the beginning of 2023. So far, the Japanese central bank has not responded, but this may change if the exchange rate approaches 145 yen.
Since its low point on July 14, 2023, the US dollar has been experiencing a period of significant strength. For the near future, it is important for the US Dollar Index (DXY) to reach the zone between 104 and 106.
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Implications for the Bitcoin Price
A strong dollar generally has a negative impact on the bitcoin price. This is because bitcoin’s performance is primarily evaluated in US dollars. When the US dollar rises, it is common to see bitcoin decline or face difficulties.
Given the interest rate hikes by the US central bank, it is logical for the dollar to increase in value and for risk assets like bitcoin to face challenges. After all, investors can now earn a 5% interest rate on US Treasury bonds.
This situation puts pressure on the markets in multiple ways. Furthermore, there is still a relatively high chance of a recession towards the end of 2023 or the beginning of 2024. During such periods, people tend to sell their risk assets to cover their expenses, leading to an increase in demand for US dollars.
The strength of the US dollar has significant implications for the bitcoin price. As the dollar continues to rise, it becomes more challenging for bitcoin to maintain its value. Additionally, the possibility of a looming recession further contributes to this downward pressure. Investors will need to carefully monitor the interplay between the US dollar and bitcoin to make informed investment decisions.