Home » US Dollar Recovers, Bitcoin Holds $20K as Fed Decision Looms

US Dollar Recovers, Bitcoin Holds $20K as Fed Decision Looms

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  • After the US dollar fell to a three-week low earlier this week, the currency showed signs of recovery on Thursday, with the US Dollar Index gaining 0.5%.
  • The ECB raised interest rates again on Thursday by 75 basis points after Eurozone inflation hit 9.9% in September.

Bitcoin has held above $20,000 since Tuesday, aided by rising stocks and volatility in the US dollar. This was the last significant resistance level recorded in early October, but a looming central bank decision and a stronger dollar could end Bitcoin’s rebound.

Traders are eager for Bitcoin’s rescue to continue. The largest digital currency hovered around $20,600 on Thursday morning after briefly approaching $21,000 earlier in the day. The S&P 500 and Nasdaq opened down 0.2% and 1.4% respectively.

“Bitcoin behaves like a commodity,” said Nick Saponaro, CEO of blockchain Divi Project. “Like gold, it is a store of value with utility.

After the US dollar fell to a three-week low earlier this week, the currency showed signs of recovery on Thursday, with the US Dollar Index (DXY) gaining 0.5%. Analysts say Bitcoin’s rally has come in step with the dollar’s decline, as the currency’s depreciation has stimulated a risk-on appetite among investors.

“Gold rose 0.65% as the dollar weakened and yields continued to fall as central bank policy expectations turned dovish,” said Tom Essey, founder of Sevens Report Research. rice field.

“There are early signs that both the dollar and interest rates are beginning to reverse, but until we have more conclusive evidence that both are indeed peaking, it is too early to call a gold bottom.” he said.

Bitcoin, like gold, has been trading flat for months, uncharacteristically low volatility — The value of the British pound, the world’s oldest currency in continuous use, flow almost evenlyDigital currency volatility relative to the Nasdaq and S&P 500 index hit a two-year low earlier this week, according to data from research firm Kaiko. A significant move in either direction is expected to result in increased volatility.

Inflation and global liquidity

Equity market volatility has started to decline (VIX has fallen below 30 for the past five days), but economists are still concerned about global liquidity.

Analysts at the International Monetary Fund (IMF) said in a report on Thursday that “after more than a decade of abundant liquidity and relatively benign markets, central banks have hiked rates to keep inflation in check, but markets have volatility has increased,” he said. “Market liquidity indicators have deteriorated across asset classes, especially in recent weeks, as uncertainty about the economic outlook and monetary policy has increased and investor risk appetite has declined significantly.”

The European Central Bank remains focused on keeping eurozone inflation down, raising key interest rates by 75 basis points on Thursday, as it did last month. Euro zone inflation in September he reached 9.9%, according to the ECB.

The Federal Reserve is scheduled to meet next week and make an interest rate decision on Tuesday. The futures market is currently pricing in a 91.8% chance that the central bank will choose a rate hike of 75 basis points, according to data from . CME GroupCryptocurrencies and equities will benefit from a slowdown in rate hikes in November or December.

“The market is fighting back against the notion that the worst global rate hike is already one or two behind,” Essay said.

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  • block works

    senior reporter

    Casey Wagner is a New York-based business journalist covering regulatory, legislative, digital asset investment firms, market structures, central banks and governments, and CBDCs. Prior to joining Blockworks, he reported on markets for Bloomberg News. She graduated from the University of Virginia with a degree in Media Studies. Email Casey. [email protected]

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