BTC Price and US Dollar: How Does the Dollar Affect Bitcoin?
The recent increase in the price of bitcoin may have more to do with market forecasts of a declining US dollar than with conjecture over the US elections. Prices have increased as it becomes more likely that former US President Donald Trump will win a second term in November, according to a July 22 report by cryptocurrency custodian Copper. The movement, though, might be related to market predictions that, as it has historically done under a Republican administration, the US dollar will weaken relative to other currencies.
A 5% Increase in 7 Days: How US Dollar Weakness Boosts Bitcoin?
The price of Bitcoin has increased by over 5% over the last seven days, rising from about $63,500 on July 15 to almost $67,000 as of this writing. According to the report, Bitcoin’s market behavior frequently resembles that of other significant fiat currencies, which rise in response to drops in the US Dollar Index (DXY). When Bitcoin hit record highs in 2017 and 2021, and the dollar declined, this pattern became apparent.
Bitcoin’s dynamics are more complex with a tendency to move in the opposite direction of the US dollar’s strength or weakness. Additionally, any administration which delivers growth would likely see investors returning to more volatile asset classes. Should markets continue to anticipate a Republican win this year, there might be an assumption of potential for the US dollar to weaken, especially considering it is currently trading at its highest level since 2002.
Copper’s head of research, Fadi Aboualfa
FAQ
Why Does the Price of Bitcoin Depend on the Performance of the US Dollar?
The price of Bitcoin is usually inversely related to the US dollar. When the value of the dollar falls, investors turn to safe-haven assets, and demand for Bitcoin increases. Therefore, the performance of the dollar can directly affect the price of Bitcoin.
How Does the Price of Bitcoin Relate to Politics?
Since Bitcoin is a decentralized asset, it is independent of direct political events. However, policy and regulatory changes can indirectly affect market perception, but the price of Bitcoin depends mainly on the performance of the dollar.
What Other Factors Affect the Price of Bitcoin?
Other factors that affect the price of Bitcoin include market demand, mining costs, regulatory news, and global economic conditions. However, the performance of the dollar is usually one of the biggest influences.
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