Bitcoin’s revival is considered to be Facebook’s Libra doing. The social media’s giant sudden foray into the cryptocurrency industry gave bitcoin, as many believe, a perfect reason to grow its valuation.
That is until one considers a simultaneous price rally that took place in the gold market. Bitcoin’s rise above the $13,000 level has only one potential link to the yellow metal’s ascent above $1,400 an ounce: a weaker US dollar sentiment.
Bitcoin has Recovered by More than 275% Since Its Bounce Back from the $3,120 Level | Image Credits: TradingView.com
Gold, Bitcoin against US Dollar
The trouble in the American greenback started with politically-influenced overborrowing. President Donald Trump’s massive tax cut of $1.5 trillion in 2017, followed by his pressure on the Federal Reserve to keep the interest rates steady burdened the US with a $22 trillion debt and $1 trillion in annual deficits. Ahead of the 2020 presidential elections, President Trump is hinting more tax cuts. Atop that, the Fed has declared that it is going to cut rates in July.
The impact is already out in the open. The US dollar on Thursday drifted further away from its highs, although the index recovered from its three-month lows of 95.843 in June. Waning sentiments for a resolution in the ongoing US-China trade war is also hurting the dollar sentiment.
“Everyone from the Reserve Bank of Australia to the Fed is talking about inflation disappointing to the downside,” Mayank Mishra, Singapore-based macro strategist at Standard Chartered, told CNBC. “The Fed arguably has more room to ease than anyone else. That, in theory, should lead to a weaker dollar.”
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