Category: inflation

New World Bank Report: Nigeria’s Exchange Rate Policies Fueling Inflation, Affecting Food Prices

Nigeria’s use of multiple exchange rates regimes may have contributed to a rise in the country’s inflation rate, the latest World Bank report has said. In addition, the report says ongoing restrictions on the use and movement of foreign exchange are “further pushing up prices of food and agricultural inputs like fertilizer.” Misaligned Exchange Rates […]

Data suggests the strong US dollar makes Bitcoin weaker argument is flawed

Analysts and traders are linking Bitcoin's bearish turn with the growing strength of the U.S. dollar, but data suggests otherwise.

At the moment, there seems to be a general assumption that when the U.S. dollar value increases against other global major currencies, as measured by the DXY index, the impact on Bitcoin (BTC) is negative.

For the past few weeks, analysts and influencers have been issuing alerts about this inverse correlation, which held true until March 2021.

However, no matter if you track a 20-day or 60-day correlation, the situation reversed over the past three months.

Dollar Index DXY (blue) vs. Bitcoin (orange, logarithmic). Source: TradingView

The correlation indicator (red) has been ranging above 50% since mid-March, indicating that both DXY and Bitcoin have generally followed a similar trend.

The dollar strengthened after the Fed speech

As Cointelegraph reported, May's Consumer Price Index (CPI) report showed inflation hitting a 13-year high, and Federal Reserve Chair Jerome Powell acknowledged that inflation could run higher than planned in the short term. Still, he clarified that "longer-term inflation expectations are anchored at a place that is consistent with our goal."

The market gave the Fed a 'vote of confidence,' causing the U.S. dollar to appreciate versus major global currencies. Meanwhile, Bitcoin dropped 8% to a $35,300 low on June 18, further reinforcing the inverse correlation thesis.

Related: Forget Elon, here's why Bitcoin traders should be watching the U.S. Dollar Index instead

Correlation is a longer-term indicator, not an intraday metric

Even though pundits and influencers love to dissect those events and extrapolate 1-day movements, one should analyze a more extended timeframe to understand the potential impacts of the DXY index on the Bitcoin price.

Dollar Index DXY (blue) vs. Bitcoin (orange, logarithmic). Source: TradingView

Notice how both markers weakened during May, after a relatively flat period in late April. It seems premature, at least, to call the recent decoupling an inverse correlation. Multiple forces could be behind Bitcoin's failure to sustain a $40,000 support on June 16 and the subsequent price correction.

For starters, Liu He, Vice Premier of China and a member of the all-powerful eight-person politburo, led a meeting on preventing and controlling financial risks on May 24. Among the decisions was a crackdown on Bitcoin mining and trading activities.

Bitcoin's hash rate dropped to the lowest level since November 2020 as miners are starting to move away from China. Huobi temporarily suspended futures trading to Chinese users, while Futures platform Bybit revealed it would have closed accounts registered with Chinese phone numbers.

Furthermore, on May 26, the United States Securities and Exchange Commission Chair Gary Gensler said the regulators are looking forward to working with fellow regulators and Congress to fill gaps in investor protection in crypto markets.

Therefore, the potential U.S. regulation and the current China crackdown on mining and trading activities seem vital to Bitcoin's recent underperformance. Once those issues are no longer threats, the gap that has been created from DXY's positive move could fade away.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Bitcoin may lose $30K price level if stocks tank, analysts warn

Downside risks for BTC price are also heightened due to the recent dollar bounce.

The ghost of stock market crash is back again to haunt Bitcoin (BTC).

It happened last in March 2020. Back then, the prospect of the fast-spreading coronavirus pandemic led to lockdowns across developed and emerging economies. In turn, global stocks crashed in tandem, and Bitcoin lost half of its value in just two days.

Meanwhile, the U.S .dollar index, or DXY, which represents the greenback's strength against a basket of top foreign currencies, has now climbed by 8.78% to 102.992, its highest level since January 2017.

The huge inverse correlation showed that investors dumped their stocks and Bitcoin holdings and sought safety in what they thought was a better haven: the greenback. 

More than a year later, Bitcoin and stock markets again wrestle with a similar bearish sentiment, this time led by a renewed demand for the U.S. dollar following the Federal Reserve's hawkish tone.

Namely, the U.S. central bank announced Wednesday it will start hiking its benchmark interest rates by the end of 2023, a year earlier than planned.

Lower interest rates helped to pull Bitcoin and the U.S. stock market out of their bearish slumber. The benchmark cryptocurrency jumped from $3,858 in March 2020 to almost $65,000 in April 2021 as the Fed pushed lending rates to the 0%-0.25% range.

Meanwhile, the S&P 500 index rose more than 95% to 4,257.16 from its mid-March 2020 peak. Dow Jones and Nasdaq rallied similarly, as shown in the chart below.

Bitcoin, Nasdaq Composite, S&P 500, and Dow Jones rose in sync after March 2020 crash. Source:

And this is what happened after the Federal Reserve's rate-hike announcement on Wednesday...

Bitcoin and the US stock market plunged after the Fed's rate hike update. Source:

Meanwhile, the U.S. dollar index jumped to its two-month high, hinting at a renewed appetite for the greenback in global markets.

U.S. dollar index jumped up to 2.06% after rate hike announcement. Source:

Popular on-chain analyst Willy Woo said on Friday that a stock market crash coupled with a rising dollar could increase Bitcoin's bearish outlook. 

"Some downside risk if stonks tank, a lot of rallying in the DXY (USD strength) which is typical of money moving to safety," he explained. 

Michael Burry, the head of Scion Asset Management, also sounded the alarm on an imminent Bitcoin and stock market crash, adding that when crypto markets fall from trillions, or when meme stocks fall from billions, the Main Street losses will approach the size of countries.

"The problem with crypto, as in most things, is the leverage," he tweeted. "If you don't know how much leverage is in crypto, you don't know anything about crypto."

Burry deleted his tweets later.

Some bullish hopes

Away from the price action, Bitcoin's adoption continues to grow, an upside catalyst that was missing during the March 2020 crash.

On Friday, CNBC reported that Goldman Sachs has started trading Bitcoin Futures with Galaxy Digital, a crypto merchant bank headed by former hedge fund tycoon Mike Novogratz. The financial news service claimed that Goldman's call to hire Galaxy as its liquidity provider came in response to increasing pressure from its wealthy clients.

Related: Hawkish Fed comments push Bitcoin price and stocks lower again

Damien Vanderwilt, co-president of Galaxy Digital, added that the mainstream adoption would help Bitcoin lower its infamous price volatility, paving the way for institutional players to join the crypto bandwagon. Excerpts from his interview with CNBC:

"Once one bank is out there doing this, the other banks will have [fear of missing out] and they'll get on-boarded because their clients have been asking for it."

Earlier, other major financial and banking services, including Morgan Stanley, PayPal, and Bank of New York Mellon, also launched crypto-enabled services for their clients.

Is Bitcoin in a bear market? 

Referring to the question "are we in a bear market?" Woo said that Bitcoin adoption continues to look healthy despite the recent price drop. The analyst cited on-chain indicators to show an increasing user growth and capital injection in the Bitcoin market.

He also noted that the recent Bitcoin sell-off merely transported BTC from weak hands to strong hands. 

7-day moving average of coins moving between strong and weak hands. Source: Willy Woo

Woo reminded:

"My only concern for downside risk is if we get a major correction in equities which will pull BTC price downwards no matter what the on-chain fundamentals may suggest. Noticing USD strength on the DXY, which suggest some investors moving to safety in the USD."

Bank of America Survey: Most Fund Managers Say Bitcoin Is a Bubble, Inflation Is Transitory

Bank of America Survey: Most Fund Managers Think Bitcoin Is a Bubble and Inflation Is TransitoryThe latest Bank of America’s Global Fund Manager Survey shows that “long bitcoin” is now the second most crowded trade. Moreover, most fund managers believe bitcoin is in a bubble and agree with the Fed that inflation is transitory. Bank of America’s June Fund Manager Survey Bank of America (BofA) released its June Global Fund […]

Fed Expects 2 Rate Hikes in 2023, Stock Market Plunges, Powell Anticipates Higher Inflation

Fed Expects 2 Rate Hikes in 2023, Stock Market Plunges, Powell Anticipates Higher InflationThe Federal Reserve on Wednesday told the public that it has forwarded the time frame for raising interest rates. “Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain,” the Federal Open Market Committee (FOMC) said in a statement. The […]

Diversification into Bitcoin a ‘prudent move,’ says Bloomberg strategist

The statement appeared as Bitcoin investors waited for fresh economic projections from the Federal Reserve and China pledged to release metal reserves amid concerns over commodity rally.

Bitcoin (BTC) price has retreated by more than 40% after topping out near $65,000 in mid-April. But that is not enough to derail the flagship cryptocurrency's long-term bull trend, especially as global markets grapple with declining national currencies and the prospect of a commodity market crash.

So believes Mike McGlone, the senior commodity strategist at Bloomberg Intelligence, who said Wednesday that diversifying into store-of-value assets is a wise strategy against gloomy currency and commodity market outlooks.

"There's little risk of the dollar dropping in value vs. similarly depreciating currencies, which means that diversification into store-of-value assets like gold and Bitcoin is simply a prudent move, in our view," he tweeted Wednesday.

Money printer goes brrr

McGlone's bullish analogy took references from a recent spike in money injected into the U.S. and Eurozone economies. The U.S. Money Supply M2, a measure of the money supply that includes cash and checking deposits (M1) and near money, reached $20.256 trillion on May 3, 2021, from $15.384 trillion on Feb. 10, 2020.

A surplus liquidity injection into the U.S. economy left the dollar weaker against top foreign currencies. As a result, the U.S. dollar index (DXY) fell by almost 11.22% from its mid-March 2020 high of 101.947 to 90.5 as of June 16.

U.S. recessions are shaded; the most recent end date is undecided. Source: Board of Governors of the Federal Reserve System

Meanwhile, the Eurozone Money Supply M2, the money supply in the European Union area, surged from €5.6 trillion in February 2020 to over €14 trillion in March 2021

However, Euro rallied against the U.S. dollar despite its oversupplied status, with Jordan Rochester, a Group-of-10 foreign exchange analyst at Nomura International, noting that the European government's attuned response to the coronavirus pandemic drifted capital out of the U.S. markets to enter the eurozone economy.

On the other hand, Bitcoin logged supersonic price rallies against the dollar and euro on promises to shield investors from higher inflation. While the BTC/USD exchange rate jumped from $3,858 in March 2020 to a little over $40,000 in June 2021, the BTC/EUR exchange rate spiked from €3,363 to around €32,000 within the same period.

Recent consumer price index reports in the U.S. showed that the inflation rate reached 5% in May 2021, the highest since 1992. In Europe, the headline rate for price growth reached 2%, topping the European Central Bank's (ECB) target.

Meanwhile, ECB chief Christina Legarde said that they would continue purchasing bonds, fearing tapering of any kind would derail the eurozone recovery.

Related: Looming ‘death cross’ may put Bitcoin bull run in danger ahead of Fed meeting

Federal Reserve officials also expect to sideline inflationary pressure as they conclude their two-day Federal Open Market Committee policy meeting on Wednesday. Earlier, the U.S. central bank said that higher CPI in April and May are "transitory in nature."

Commodity shock ahead?

Investors deeming hedging assets like Bitcoin as risky chose to stay hedged in relatively less volatile areas of markets such as commodities. Copper, the bellwether for macroeconomic health, surged 67% as investors looked for havens against falling currencies. Aluminum, zinc, among other metals also reported massive uptrends.

But China recently has come up with a plan to tame the booming commodity prices. The National Food and Strategic Reserves Administration said Wednesday that it would increase the supply of metals, including copper, aluminum, and zinc, to make them available to manufacturers.

McGlone hinted that a prospect of declining commodity prices would also mean great investment opportunities in the gold and Bitcoin markets.

JPMorgan Is Stockpiling Cash – CEO Claims There’s a ‘Very Good Chance Inflation Will Be More Than Transitory’

JPMorgan Is Stockpiling Cash - CEO Claims There’s a ‘Very Good Chance Inflation Will Be More Than Transitory’Investment bank JPMorgan Chase is stockpiling cash according to the company’s CEO Jamie Dimon. The investment banker doesn’t seem to believe inflation is “transitory” and he thinks there’s a “very good chance” inflation could stick around. JPMorgan Chase CEO: ‘I Do Expect to See Higher Rates and More Inflation’ At the end of April, […]

Billionaire Paul Tudor Jones Says ‘I Like Bitcoin’ — Will Go All in on Inflation Trades if Fed Says ‘Things Are Good’

Billionaire Paul Tudor Jones Says 'I Like Bitcoin' — Will Go All in on Inflation Trades if Fed Says 'Things Are Good'Billionaire hedge fund manager Paul Tudor Jones says he likes bitcoin. Noting that he can trust math, the famed hedge fund manager said, “bitcoin has appealed to me because it’s a way for me to invest in certainty.” Jones also shared his investment strategies in response to the Fed’s policy. Paul Tudor Jones on Bitcoin, […]

Nigerian Lawmakers Slam Naira Devaluation, Warn of Inflation Implications

Nigeria’s House of Representatives has moved a motion calling on the country’s central bank to end the continuing devaluation of the naira. In his unanimously adopted motion, House Representative Bamidele Salam warned the Central Bank of Nigeria (CBN) of the negative “implications of further devaluing the naira.” Lawmakers Slam CBN U-Turn The House’s warning follows […]

Deutsche Bank Warns: Ignoring Rising US Inflation Akin to ‘Sitting on a Time Bomb’

Deutsche Bank Warns Ignoring Rising US Inflation Akin to 'Sitting on a Time Bomb'Deutsche Bank published a report Monday noting that the United States is facing “the very real specter of consumer-driven inflation.” The bank’s chief economist David Folkerts-Landau and others notably highlight the Federal Reserve’s monetary easing policy and recent tolerance toward higher inflation. Deutsche Report: ‘Transitory Inflation Could Feed Into ’70s Style Stagflation’ The price of […]

2 Bitcoin price indicators suggest BTC has not bottomed yet

Traders are using a variety of strategies to determine whether Bitcoin price has bottomed, but on-chain activity and derivatives data hint that the situation remains precarious.

Traders are using various strategies to determine whether Bitcoin price has bottomed, but on-chain activity and derivatives data hint that the situation remains precarious.

Has Bitcoin price bottomed yet? According to @noshitcoins, derivatives and on-chain data signal that further downside could be in store.

Traders have been trying to time the much-anticipated trend reversal ever since Bitcoin (BTC) initiated its 48% correction to $30,000 on May 12. The move culminated with $12 billion worth of futures long positions being liquidated, and to date, trader's confidence remains somewhat dampened.

The community started looking everywhere for trend reversal signs, including technical patterns, United States CPI inflation data and Bitcoin exchange deposits. For example, some analysts stated that a higher high, followed by a move above $40,000, would be enough.

However, two days later, Bitcoin managed to break the $40,000, although the move didn't last for more than six hours. Meanwhile, other traders inferred that a retest of the $30,000 bottom is needed before a bounce.

Although there could be empirical evidence or even logic backing those statements, market prices don't always react to external news or previous chart formations. Unlike stocks, Bitcoin investors can't rely on commonly used valuation multiples or even comparables.

Sure, a digital store of value is one use case, but at the same time, it is uncensorable and easily transferable. Furthermore, some users value Bitcoin's peer-to-peer fiat convertibility outside of KYC-regulated exchanges. Another factor to consider is the investors who are increasing their Bitcoin portfolio due to the lack of correlation with traditional financial assets.

This panacea of diverse and sometimes conflicting narratives creates barriers for modeling the market's potential, adoption status, and even measuring the effectiveness of recent developments.

Some will cheer for Tesla and large companies building up Bitcoin reserves, while others couldn't care less about who's holding BTC and instead focus on the challenges of scalability and fungibility.

Skew: the professional "fear and greed" indicator

Call options allow the buyer to acquire Bitcoin at a fixed price when the contract expires. Put options, on the other hand, provide insurance for buyers and protect against price drops.

Whenever market makers and professional traders lean bullish, they will demand a higher premium on call (buy) options. This trend will cause a negative 25% delta skew indicator. On the other hand, if downside protection is more costly, the skew indicator will become positive.

Bitcoin 30-day options 25% delta skew. Source:

A 25% delta skew oscillating between a negative 10%, and a positive 10% is usually deemed neutral. This balanced situation held until May 16, as Bitcoin lost the critical $47,000 support, which had held for 76 days.

As the markets deteriorated, so did the 25% delta skew indicator, and the cost of protective options spiked. Therefore, until the metric establishes a more neutral pattern nearer to the 5% level, it seems premature to call the market bottom.

Active Bitcoin supply signals that weak hands need to cool off

Traders also monitor the number of BTC that have been active lately. This indicator can't be deemed bullish or bearish by itself as it does not provide information on how old the involved addresses are.

Active supply that transacted at least once in the trailing 30 days. Source: CoinMetrics

The 500% price rally from Oct. 1, 2020, and the $64,900 peak on April 14, 2021, caused a major increase in the supply moved in the months before the rally. When this metric presents a sharp decrease, it indicates that investors are no longer interested in participating at the current price level.

There are currently 2.2 million BTC active over the past 30 days, and this is significantly higher than levels seen before Oct. 2020.

As things currently stand, traders should not be so that Bitcoin has bottomed, at least until the market no longer has relevant activity surrounding the sub-$40,000 level.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Market Forecaster Jim Bianco Says Ethereum Has a Lot of Upside, Investor Doesn’t Hold Bitcoin

Market Forecaster Jim Bianco Says Ethereum Has a Lot of Upside, Investor Doesn't Hold BitcoinOn May 27, the president of Bianco Research, Jim Bianco explained during an interview that he believes there’s a lot of upside potential when it comes to the crypto economy. Bianco said since 2017 he’s owned a basket of crypto assets like ethereum, but he doesn’t hold bitcoin. Bianco Research President Owns a Basket of […]

BOJ’s Kuroda Criticizes Bitcoin — Central Bank Governor Says Trading Is ‘Barley Used for Settlement’

Following the recent developments in China and the environmental concerns about bitcoin’s energy consumption, the Bank of Japan Governor Haruhiko Kuroda criticized the leading crypto asset bitcoin in an interview on Thursday. BOJ’s Kuroda Says Bitcoin ‘Volatility Is Extraordinarily High’ Bitcoin prices have slumped again on Friday after a tumultuous week. After tapping a daily […]

A Look at Why Venezuela Is the Third Country With the Most Crypto Adoption

A Look at Why Venezuela Is the Third Country With the Most Crypto AdoptionVenezuela has been listed as the third country with the most cryptocurrency adoption in the world by Chainalysis in its 2020 report. With its citizens coping with crippling inflation and losing purchasing power, the country has taken a turn for these assets to survive. But what are the real numbers behind this crisis that made […]

White House Defends Trillion-Dollar Stimulus While Jamie Dimon and Larry Summers Warn of Runaway Inflation

On Wednesday the White House defended President Joe Biden’s trillion-dollar spending proposals despite the criticism concerning rising inflation and low-interest rates. Inflation has risen at unprecedented levels in the U.S. and the average American’s purchasing power is growing less powerful. Now critics like JPMorgan Chase CEO Jamie Dimon and American economist Larry Summers have blasted […]

By continuing to use the site, you agree to the use of cookies. more

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.