When the dollar went down, why did Bitcoin (BTC) soar?

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When the dollar went down, why did Bitcoin (BTC) soar?

08/08/2020

The decline in the US dollar and the increase in Bitcoin occurred at the same time. So what happened? Before giving the answer, let's examine the multiple underlying factors: First, the downward adjustment of the US Treasury bill rate and the policy of monetary expansion.

These policies caused too many dollars to be sold and the dollar index to fall further. In the light of the latest data, it shows that the US dollar index dropped below 93. This is not only the lowest point this year, but also shows us a drop that has passed the lowest in two years.

Short positions in the US dollar derivatives market have also reached a new high since April 2018. Global hedge funds believe the dollar will fall further. The total decline in the US dollar increased by approximately $ 5.3 billion this week to $ 24.5 billion.

In terms of correlation, the correlation between Bitcoin and the US dollar decreased, while the correlation between gold and the US dollar decreased and the correlation between Bitcoin and gold increased. The price recovery at this point indicates that both gold and Bitcoin are rising rapidly due to the falling US dollar index.

The increase in gold can be explained by the decline in the US dollar, which has increased global demand for safe-haven assets such as precious metals. Although Bitcoin has not yet reached safe-haven status, it will be another global alternative investment destination besides gold. Additionally, as gold rises to the people's psychological peak, most of the US dollars currently sold will start flowing into the Bitcoin and other digital currency markets. For example, data from Coinmetrics show that USDT supply continued to increase, especially in July, when the upward curve became steeper. At the same time, gold's upward momentum has slowed, indicating that more and more US dollars are starting to print more and more currency into the digital currency market.

The large amount of money flowing into the exchange is USDT, but Glassnode's data shows that the exchange's USDT balance has dropped since April. At the same time, the balance of Bitcoin exchanges continues to rise. Based on this, we can think that most of the USDT that flows into the stock market is used to buy Bitcoin.

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