The Impact of US dollar on Bitcoin

[palle11]

With the dollar having some gains and strength currently, I see that it is having an impact on the price of bitcoin. I have followed this up since bitcoin started the bull last year and around April to December during the American presidential election between Donald Trump and Joe Biden, when the US dollar dropped for whatever reasons including the usual fears of change of leadership or administration as investment in dollar were dropped for uncertainties and the bull hit the bitcoin market because most investors changed gears to bitcoin.

And now it is changing with the rising strength of US dollar which looks like what analyse call correction which maybe up to 15% as days go on.

Bitcoin seem to be dropping while dollar is strengthened. I think this is because at least 70% of bitcoin trading is done mostly by dollar either directly or by conversion. The chart below show the current fallen price chart of bitcoin against the dollar.

[Poker Player]

Yes, of course, it is clear that it affects in the short term, just as it affects in the short term if the stock markets rise. But in the long term what matters most is massive fiat printing, 0% rates and limited supply of Bitcoin. In the long term it can only go up.

[20kevin20]

USD is only one of the many reasons BTC's price is moving. The USD getting stronger isn't really a sign BTC is going to drop. Especially as we're 1 year post halving, which is usually a very bullish year.. things may go unexpectedly wild soon, who knows..

[Upgrade00]

I do not think that changes in the value of US dollar alone is sufficient to have a very significant effect on that of Bitcoin.
A lot of Bitcoin trading is done using USD and also it is the too currency in the world, however changes in it are usually very small when compared with that in Bitcoin, holders would not sell their stash because of a rising Fiat currency, traders may also be hesitant and it is unlikely to have a synchronized effect.

[magneto]

This is a bit of a stretch as far as the narrative goes.

People price BTC mainly in USD anyway, so it makes no sense for USD's relative performance compared to other FOREX to affect BTC/USD prices in any meaningful way.

In fact, I would argue that if USD strengthens, BTC would likely strengthen against other currencies as opposed to decline - simply because most traders value BTC using USD as a benchmark.

[franky1]

use the bread loaf value

if 1 chinese loaf of bread is 10yuan
last year converted a loaf of bread would get ~$1.10 ($1:9Y)
but this year a loaf of bread would get $1.50($1:6Y)

so if chinese people sold say 10000 loafs of bread last year(100000Y). they would get $110k which they could use to buy bitcoin
this year for the same loaves of bread(100000Y) thy would get $150k. meaning they can buy more bitcoin

their loaf income in yuan has not changed. but they get more dollar for it. and so they can buy more bitcoin on a dollar exchange.

so yes forex does affect how much a chinese person can buy even if their internal chinese yuan income doesnt change

[GreatArkansas]

Most of the volumes only I believe are on the USD.

Another thing I observed was the U.S. Dollar Index, in which we saw a huge drop on the US dollar index few days that's when we saw the new all-time-high of Bitcoin around 61,000 USD.
That's why I believe somehow, the U.S dollar is significant on Bitcoin right now.

[sunsilk]

I don't think that it is only USD that has something to do with what we're experiencing lately for bitcoin's drop. Remember that we've came from $61k which was the highest for bitcoin and as it cuts there, it has to correct.

The same way that what we've seen before it has pushed to the peak, bitcoin has dropped IIRC around $44k. But I agree what OP and kevin said that it's just another factor.

[LUCKMCFLY]

The analysis in OP is very accepted, it may be one of the reasons why the value of Bitcoin may fall a bit, but we do not really know what is the reason why it falls. In the Bitcoin market, when the price goes up or down, there is always a piece of news that says that Bitcoin fell or rose because of X, and then technical analysts come out saying that was because of that, and we really don't know. It is very difficult to try to understand why it fell or rose, sometimes yes, maybe a tweet from an influencer, someone like Elon Musk, but when there is a fall it is difficult to determine it, besides that because of a news the market does not fall instantly, unless it's a Fundamental.

The rise of the dollar with respect to the decline of Bitcoin I think there may be something there, perhaps some investors are passing their money to dollars to protect their investment and not leave everything to volatility or luck. It is also necessary to emphasize that we live in a total hegemony of the dollar, this influences, in addition, the FED has come out with new statements these days talking about Bitcoin, Gold, the dollar.

Traditional investors who have entered the Bitcoin market are always going to trust what is safe, and what is safe for them is the dollar, gold, but if this is the case I do not think that all whales take refuge in the dollar.

[famososMuertos]

Is the "speech" that exists in a traditional market, supposing ever  that it has an effect on another; the value of the dollar in its commercial effect against other currencies supposes a real effect, so much so that it is known that several countries want to eliminate that hegemony, but such effect in traditional markets is not the same as that produced with bitcoin.

[error08]

the effect of USD strengthen would be insignificant against bitcoin, people don't sell bitcoin just because of a slight increase in the value of a currency, which is basically depreciating in the long-term, simply inevitable. The central bank could print money infinitely depends on the U.S. Federal Reserve decisions but the limited supply of bitcoin make sure its value will increase over time. However, the rise and fall of bitcoin value depend on the market demands at a certain period of time, especially in this year, if there are some corrections it's a normal thing as people want to take profits and withdraw their money.

[Theb]

I'm still inclined to believe that it is merely coincidental rather than believing that there is a direct connection between the US dollar price and Bitcoin because if you ask me I will just say that Bitcoin was the first one to recover during the start of the pandemic even before the US have elected a new president so Bitcoin during that stage now that the US is recovering economically from that pandemic it was just timed perfectly when Bitcoin's is now consolidating on a new level. If you want to prove your point more you must show data showing that US traders are offloading their Bitcoin in exchange for USD which as far as I research I don't see any news saying that they are taking profit.

[palle11]

I'm still inclined to believe that it is merely coincidental rather than believing that there is a direct connection between the US dollar price and Bitcoin because if you ask me I will just say that Bitcoin was the first one to recover during the start of the pandemic even before the US have elected a new president so Bitcoin during that stage now that the US is recovering economically from that pandemic it was just timed perfectly when Bitcoin's is now consolidating on a new level. If you want to prove your point more you must show data showing that US traders are offloading their Bitcoin in exchange for USD which as far as I research I don't see any news saying that they are taking profit.

Without chart actually but don't you know the effect of sentiment in the market?

The fact the bitcoin recovered beyond the dollar is to show that people were probably pulling the rug out of the dollar to hide under bitcoin for uncertainty of out going government policies during the election. Now with signs of recovering of the economy, things might be turning into shape as indicators could be supporting the dollar. Is just my IMO and to get the response here.

[lixer]

I think dollar could gain as much strength as it wants but it will never be as good as bitcoin. Bitcoin is store of value and even though dollar "looks" like it is gaining some power the reality is that we are talking about 5+ trillion printed for covid this year, that is not a normal price, and it wasn't for people neither only some parts of it were for people and majority was for companies and that is why I think it will keep on being worse than bitcoin.

Bitcoin foundations always supported the people who needed some place to hide their money and not leave it to morals of governments, doesn't matter which nation and doesn't matter which party, and no matter how strong dollar becomes, it will be weak against bitcoin. The drop is about 6 billion dollars worth of bitcoin futures being unlocked, and it will recover very soon, hell it recovered already.

[slapper]

In spite of already been a part of the financial world, I do not think that bitcoin is affected strongly by the price of USD.

First, the price of the dollar, overall, is more stable than bitcoin. They do not run around, go up, and then fall down in such a short time. Instead, their movement is count by years and unless you have big leverage, there is not much you can do if you are a pure day trader

Second, most people investing their money in bitcoin does not feel interesting in USD at all. They only look at the situation occurring inside the US nation which they believe can affect global finance such as the presidential election, covid-19. And those people usually see bitcoin as a true form of investment whereas the dollar is just a tool for daily needs

[goaldigger]

Fiat currency can really affect the price of Bitcoin and not just USD since its not the only strong currency as of the moment. If USD goes back on top, we might see some price drop with Bitcoin since big investors are trying to play on FOREX for now, but if those government continues to print fiat money, Bitcoin will be the best option and since we're still on pandemic, printing more can still happen. There's a lot of factors that we need to consider, US Dollar affects Bitcoin in short term, the impact might not be big enough to move the price of bitcoin but still it affects the price.

[tbct_mt2]

And now it is changing with the rising strength of US dollar which looks like what analyse call correction which maybe up to 15% as days go on.

Bitcoin seem to be dropping while dollar is strengthened.

The weaker conditions of US dollars and other big fiat currencies help Bitcoin as dramatic growth in price. The opposite condition, a strengthened condition for fiat currencies don't must to have effects to bring bitcoin price down. Bitcoin is a unique digital currency and its price won't be affected by the government regulations or power of fiat currencies.

The pandemic and massive money printing activities from global governments help bitcoin jumped into its bull run faster than what I thought. It is good for all. Ups and downs of fiat currencies only help to increase the recognition that they are not the safe heaven for people.

[SquallLeonhart]

With the dollar having some gains and strength currently

But, it may get weakened again as pandemic threats are returning as a second wave. New president and the expectation of changes are core reasons why dollar got some appreciation recently but I doubt how long that will persist if there will be any lock down. Invention of vaccine and new government may turn as not enough reasons for dollars to continue its rally when considering against economic crisis due to lock down.

Bitcoin seem to be dropping while dollar is strengthened. I think this is because at least 70% of bitcoin trading is done mostly by dollar either directly or by conversion. The chart below show the current fallen price chart of bitcoin against the dollar.

This is how alternate investment instruments are working. Investors may switch over between traditional and alternate things. But I believe this time crypto investors will not get panic again which may lead to lesser volatile in crypto space compared to other investment categories.

[STT]

DXY is a measure of Dollar vs other FIAT and this means it doesnt have to alter Bitcoin at all as we are not following QE practise and other FIAT failure that mean there is no proper dollar standard in existence as each year its altered.

Dollar does run in line with investment and speculative sentiment which will alter the highest prices in Bitcoin as this is a growth industry not revenue or cash productive vs utilities or other safe investments for example.   The 10 year bond yield is rising which I presume raises the potential cost of leveraged plays against the dollar into alternative holdings such as Bitcoin so generally DXY will make progress in BTC much harder especially if a trend is established where as previously DXY was falling for almost a year and dependable in being a cheap source funding currency.

I dont think BTC is defined by dollar or it would represent nothing new, but all markets have a higher and low pricing to them like gearing.   The world global reserve system is based around dollar so theres a large amount of influence in play.   Try reading this long term commentators observations:

The US dollar continues to strengthen and that leaves us with an opportunity to highlight the bull case. DXY is having its best month since July 2020. The US week wrapped with softer than expected core PCE price index at 1.4% y/y vs exp and prev 1.5%.

https://ashraflaidi.com/forex-news/dollar-in-demand

At the same time, the eurozone is struggling to roll out the covid vaccine and on Thursday the ECB's De Guindos said H1 growth will likely be negative.

Arguably this is the most significant point, if EURO is weak then Dollar is likely strong.   The EU is failing in its policies that would lead into an earlier resumption of normal business, that means prior speculation of growth for 2021 is likely wrong hence a shift back to dollar over euro.

[Wind_FURY]

What would Dollar HODLers do if, the U.S. Dollar “strengthens more” but Bitcoin surges to 6 digits, and would give them an opportunity to profit more in Dollars? Still HODL a “strong” U.S. Dollar?