Schlagwort: crypto business

• Bitcoin and other altcoins continued falling on Wednesday.

• The US dollar index continued rallying as crude oil price jumped.

• There are signs that the Fed will continue hiking rates.

Bitcoin Cash, Stacks, Neo, Solana, and Stellar lumens price drifted downwards as a sense of fear engulfed the financial market. Most of these coins dropped by more than 3% on Wednesday as demand remained significantly low.

The main catalyst for the sell-off was the recent trends in the energy market. Brent, the international benchmark, surged to over $90 per barrel. It has soared by over 25% from the lowest level in June and some analysts see it rising to $100 in the coming weeks.

The rising oil prices mean that the Federal Reserve could maintain its hawkish tone in the coming months. Economists have a mixed feeling about what to expect. Some of them expect the bank to hike rates by another 0.25% this month and push them to 5.75%.

Other analysts believe that the Fed will leave rates intact as officials wait for more details about inflation. This view was supported by Christopher Waller, one of the most hawkish Federal Reserve officials.

The rising expectation of another Fed hike has pushed many investors to the safety of the US dollar. Data shows that the dollar index has surged to more than $104, the highest level in more than five months.

As I wrote in this article on Tuesday, cryptocurrencies tend to have an inverse relationship with the US dollar. In most periods, coins like Bitcoin and Ethereum tend to retreat when the DXY index is soaring.

Solana and Stellar prices retreated even after a dose of good news from Visa, the biggest fintech company in the world. In a statement on Tuesday, the company said that it would expand its USDC expansion to Solana’s ecosystem. Solana is known for its fast speeds and low transaction costs.

Visa hopes to use this technology in its business of processing billions of dollars every day. This news impacted Stellar because USDC is built using its technology.

The outlook of Bitcoin and other altcoins is relatively bearish for now since there is no major catalyst in the near term. A likely catalyst will be the eventual acceptance of a Bitcoin ETF by the SEC. This is highly likely now that GreyScale won a major lawsuit last week.

How to buy Bitcoin Cash

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• US deficits keep rising despite the economy growing
• US Treasury returns dropped for the past three years in a row
• A weakening dollar might cause cryptocurrencies’ next step higher

In previous articles published here, I’ve argued that the next move in the cryptocurrency market will likely be driven by the US dollar rather than crypto-related news. Given the current interest rate levels, the surging deficit makes raising money difficult for the US government.

Hence, one way to make it easier is to lower the rates.

The Federal Reserve will never tell market participants that rates cannot move much higher. The moment it does that, inflation expectations are not anchored anymore.

However, one might take time to understand what the bond market tells. For the first time in the history of the United States, US Treasury returns dropped three years in a row.

A vicious circle could spark the US dollar’s weakness

The price of a bond is inversely related to its yield. Lower bond prices mean higher yields and one way for bond prices to bounce back is for yields (i.e., interest rates) to decline.

But the deficit poses a huge problem. Deficit spending is one of the reasons why bonds underperform.

Because deficits surged even as the economy grew, more bonds are issued to pay for it. However, issuing more bonds means issuing more debt, but interest rates are not low anymore as they were in the past years.

Therefore, interest rate expenses would increase, offsetting the revenue collected from selling the bonds.

One way to solve this problem is to let the dollar slip. The starting point might be a signal that the Fed has already reached the terminal rate.

If the dollar starts weakening, its decline should be generalized and also have ramifications for the cryptocurrency market. Therefore, if Bitcoin is about to make a move higher, one should keep an eye on the US deficit and the dollar.

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