Bitcoin, a major digital currency, rose by a third since the end of July – from $9,165 to $12,200 on Tuesday. Although the price of Bitcoin stepped back a little to $11,754 on Wednesday morning, the digital currency has made a tremendous upward move from the level of $4,000 since mid-March.
This digital currency is assumed by the market as a risky asset and an alternative to the U.S. Dollar. The Greenback may not be in favour in the investors’ eyes. The U.S. Dollar index that represents a basket of six major currencies to the Greenback fell from March highs of 104 points to 92.35 points or more than 12%. It is now at its lowest since May 2018.
The American currency is pressured by the uncertainty of the pace of further economic recovery, presidential elections, unprecedented rise of Federal Reserve balance and money supply, soaring debt volumes, low interest rates and U.S. Treasuries yields that are holding below one %.
On the other hand, a huge amount of freshly printed Dollars is seeking a place to be invested. So, amid falling allure of the U.S. Dollar alternative assets’ prices like gold, stock indexes and other major currencies are rising. Bitcoin has joined this trend. However, it is performing a huge volatility. Analysts are talking a lot about a rally in the S&P500 index or gold, but they “only” gained 55% and 43% respectively since March 2020. Bitcoin has posted gains outperforming the rise of those assets by 500%.
Such boldness of Bitcoin price movements occur as it has no solid economic ground under its value. It is a highly speculative asset with no certain mechanics of its price formation. Thus, further movements of the price of Bitcoin is hard to predict. The technical picture suggests that the upward trend may continue. Breaking through August 2019 highs above $12,300 may flag a movement to the $13,200 level. However, this will largely depend on market sentiment and the demand for alternative assets to the U.S. Dollar. So, another downward correction of the Bitcoin price after a sharp rally is quite possible. In this case the price of Bitcoin may retract to the $10,500 level.
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