Federal Reserve Governor Christopher Waller on Friday expressed his hesitation towards the creation of a U.S. central bank digital currency, saying that the digital currency is likely not important to the long-term status of the U.S. dollar.
Waller made such comments while delivering a speech at a symposium sponsored by the Harvard National Security Journal in Cambridge, Massachusetts, on Friday.
The Fed governor said although his views on central bank digital currencies (CBDCs) are well known, he remains strongly unconvinced that there is a compelling need for the Fed to create a digital currency.
Waller said those who advocate for the development of a U.S. CBDC often say how it is significant for the long-term status of the dollar, especially as other major jurisdictions are moving towards adopting a CBDC.
He disagreed with such claims, stating that: “The underlying reasons for why the dollar is the dominant currency have little to do with technology, and I believe the introduction of a CBDC would not affect those underlying reasons.”
The Fed governor explained what could occur to the dollar’s role as the global reserve currency of choice if other countries adopted the digital currencies and the U.S. did not. He said factors making the dollar attractive for holding value and conducting international business would remain majorly unchanged, and the challenges that a CBDC might resolve could be achieved through other means.
Waller said: “The dollar serves as a safe, stable, and dependable form of money around the world. I don’t think there are implications here for the role of the United States in the global economy and financial system.” He, therefore, said people should instead focus and talk about the relevant CBDC-related topics, such as its impacts on financial stability, payment system improvements, and financial inclusion.
Waller’s comments come as a response to recent arguments posted by his fellow board members and other lawmakers favoring the introduction of a US CBDC.
In July, Fed Vice Chair Lael Brainard said a CBDC would be a “natural evolution” of the payments system, saying the digital currency could play a key role in protecting financial stability. Lawmakers like Rep. Jim Himes, D-Connecticut, have also been outspoken advocates for the establishment of a U.S. central bank digital currency.
The digital currency remains a hot topic for the US government. In March, President Joe Biden issued an executive order on digital assets. And based on the report, Biden wants the US to lead in a space that China is far more advanced in with its digital Yuan projects. But a digital dollar could take years to develop because different stakeholders see multiple problems with rolling out a digital currency from the Federal Reserve.
Bitcoin regained its bullish bias after reclaiming $50,000 ahead of the yearly close, even its safe-haven rival, the U.S dollar, signaled continued upside strength in the coming sessions.
Hillary Clinton, the former US secretary of state under President Barrack Obama, warned all countries to take the rising popularity of crypto coins seriously because such instruments have the potential to undermine the role of the US dollar and the power of nation-states in the global economy.
The former democratic presidential candidate made the comments via a video panel discussion at the Bloomberg New Economy Forum in Singapore on November 19. She stated: “One more area that I hope nation-states start paying greater attention to is the rise of cryptocurrency — because what looks like a very interesting and somewhat exotic effort to literally mine new coins in order to trade with them has the potential for undermining currencies, the role of the dollar as the reserve currency, for destabilizing nations, perhaps starting with small ones but going much larger.”
Such remarks indicate that Clinton is not a fan of cryptocurrencies. She warned about the rise of new cryptocurrency technologies amid complex relations between the US, China, and Russia. She thinks that widespread adoption of crypto assets could undermine traditional currencies, including the dollar, and destabilize countries, small and big.
Clinton, whose 2016 presidential campaign was marred by hacks, mentioned Russia as an example that could use cyber tactics and cryptocurrencies to weaken other countries. She accused Russia’s President Vladimir Putin of deploying “a very large stable of hackers and those who deal in disinformation and cyberwarfare.”
The Future of Cryptocurrency Is Complicated
Clinton’s concerns regarding the potential of cryptocurrency to destabilize countries are valid.
Crypto investment goes against every basic rule of investor protection. Such coins trade on platforms that don’t have any of the safety mechanisms that traditional exchanges have.
The legal status of cryptocurrency varies substantially from country to country; while in some jurisdictions, the relationship remains to be properly designed or is continuously changing.
Some nations have placed limitations on the way crypto can be used, with banks banning their customers from making crypto transactions. Other nations such as China, have banned the use of Bitcoin and altcoins outright with heavy penalties in place for anyone making such transactions.
The US recently passed the $1 trillion infrastructure bill that will bring tougher rules on crypto trading taxes.
However, some developing countries are embracing crypto assets, with El Salvador adopting Bitcoin as a legal tender as a way of improving the economy and Zimbabwe is seen trying to follow the same path.
Meme-cryptocurrency Shiba Inu (SHIB) has lost more than 50% of its market valuation in three weeks since its all-time highs in late October.
SHIB price dropped to as low as $0.00004251 on Nov. 19 after correcting by almost 55% from its all-time high of $0.00008854. Its price recovered a small portion of its losses on Friday, but the move looked indecisive due to weaker trade volumes, i.e., not many traders supported the rebound trend.
Some analysts noted that a sharp pullback in the Shiba Inu market was unavoidable after its price skyrocketed by more than 1,100% since Oct. 1.
For instance, an independent market analyst, under the pseudonym John Wick, called SHIB’s ongoing price correction a “topping signal,” thus suggesting additional selloffs in the sessions ahead.
SHIB/USD four-hour price chart. Source: TradingView, John Wick
“Buying the dips”
Price swings of 50% or more are not too uncommon in the cryptocurrency market. For example, Bitcoin had plunged from around $65,000 to below $30,000 in less than thirty days earlier this year. But later, BTC rebounded to establish a new record high at $69,000.
At the core of Bitcoin’s volatile rebound was a well-circulated narrative that projected it as a hedge against rising inflation all across the world. Meanwhile, for Shiba Inu, the core bullish narrative remains “community,” as stated by one of the coin’s most popular endorsers, David Gokhshtein.
The founder of Gokhshtein Media and CEO of PAC Protocol reminded that Shiba Inu’s bullish performance this year has come on the back of strengthening community support and despite absence of major endorsements by celebrities and billionaires.
$SHIB going to bring more people into the #crypto space just like $DOGE did.
Even $FLOKI with their marketing will bring my eyes here.
— David Gokhshtein (@davidgokhshtein) November 13, 2021
Gokhshtein tweeted Friday asking his followers who among them are “buying the dips,” thus also reiterating his faith in a potential SHIB price rebound even after a 50%-plus price correction.
Bul technical outlook
Shiba Inu’s ongoing price correction had it trend lower inside what appeared like a Bull Flag range, raising possibilities that the coin would continue its move higher in the future.
In detail, Bull Flags occurs as a brief pause in the trend after a strong price move higher.
Related: Supersize McShib: Shiba Inu the largest ERC-20 holding among ETH whales
The pattern looks like a downward sloping channel/rectangle represented by two parallel falling trendlines. Typically, Bull Flags result in price breaking out of the upper trendline to levels at length equal to the height of the previous uptrend (called Flagpole).
With that said, SHIB’s next attempt to break above its Flag’s upper trendline, if accompanied by a rise in trading volume, could result in a price leg higher toward $0.00010000.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Dogecoin (DOGE) soared on Oct. 28 amid massive capital rotations out of its top meme coin rival Shiba Inu’s (SHIB) market.
Notably, the DOGE price rallied by a little over 44% to reach its intraday high of $0.3449. Its gains appeared in contrast to SHIB’s losses in the same period. On the other hand, the so-called Dogecoin Killer dropped almost 28% to log an intraday low at around $0.00005700—in the same hour DOGE printed its daily top.
The sudden price rally also pushed Dogecoin’s market cap over $40 billion, a mettle Shiba Inu achieved hours before, with the two cryptocurrencies now neck and neck currently battling for the ninth place by market cap
Traders started flocking into Dogecoin markets hours after Elon Musk, the CEO of Tesla and SpaceX posted a new tweet about the meme cryptocurrency.
If I send you 2 Doge, will you promise to send me 1 Doge?
— Elon Musk (@elonmusk) October 27, 2021
Musk’s earlier supportive tweets prompted DOGE to climb by more than 1,500% in the first five months of 2021.
Long DOGE, Short SHIB
Shiba Inu rallied exponentially heading into Q4, rising by around 1,200% in October on hopes that it would gain a listing on Robinhood, a U.S.-based zero-fee trading app, and its foray into the emerging decentralized finance (DeFi) and nonfungible token (NFT) sectors with new product launches.
Nonetheless, SHIB’s supersonic bull run also made it overvalued based on some key metrics, notably the Relative Strength Index. So it appears, spot and derivative traders decided to secure/rotate their profits.
Su Zhu, co-founder, CEO, and CIO at fund management firm Three Arrow Capital noted earlier on Thursday that traders rotated their easy-to-short Shiba Inu perpetual swap profits — as SHIB topped out at $0.00008854 — into the Dogecoin perpetual market.
The former Deutsche Bank trader suggested that DOGE can rally toward $0.88 next should traders rotate profits from SHIB to Dogecoin.
88e-6 $shib touched
rotatooor to .88 $doge now? pic.twitter.com/AqRd85rCSk
— Zhu Su (@zhusu) October 28, 2021
Around $20.8M DOGE rekt
Dogecoin’s price moves also caught derivatives traders off-guard as they lost about $20.80 million in total liquidations across the previous 24 hours. Around $18.17 million worth of those liquidations emerged out of leveraged long bets after the DOGE price dropped to its weekly low of $0.2179 Wednesday.
In contrast, the ongoing 12-hour timeframe saw bears making more losses than bulls, with $8.9 million worth of bearish Dogecoin bets getting liquidated against $5.22 million worth of bullish bets concerning the same token.
DOGE total liquidations across all exchanges. Source: ByBt.com
On the whole, however, Dogecoin traders were the majority short in the previous 24 hours, with FTX and OKEx users turning out to be exceptionally bullish with 58% and 77% of their net positions skewed long.
A sudden bearish reversal in the Shiba Inu market also led to SHIB liquidations worth $31.41 million, the third highest among all the cryptocurrencies in the previous 24 hours.
Related: Shiba Inu risks drop with SHIB’s 574% October’s price rally near exhaustion
PostyXBT, an independent market analyst, warned about excessive leverages in both SHIB and DOGE markets.
“Play spot and not leverage,” he said, adding that “the volatility could quite easily wipe out before a big move in intended direction.”
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Shiba Inu (SHIB) continued its march upward on Oct. 27 with its price hitting a record high of nearly $0.000060 before correcting lower.
SHIB rallied by more than 25% to an all-time high of $0.00005959, crossing above its previous all-time high of 0.00005000 (data from Binance). The latest move upside pushed the token’s month-to-date (MTD) returns to approximately 726%, making it the fifth highest-grossing cryptocurrencies entering the final quarter of 2021.
SHIB’s October gains had slipped to near 606% following a price correction from its record high, still higher than the rest of the top-cap crypto rivals, including Bitcoin (BTC), Ether (ETH), Cardano (ADA), and Solana (SOL).
Top five cryptocurrencies ranked according to their October gains. Source: Messari
Still, SHIB’s superior performance particularly stands out against its meme coin rival, Dogecoin (DOGE), whose MTD gains are currently only about 8%. Moreover, Shiba Inu’s market cap how now reached $22.1 billion — the eleventh-largest — putting it right behind Dogecoin’s $31.53 billion in tenth place.
SHIB copying DOGE bull run?
Shiba Inu was launched in 2020 after taking heavy inspiration from Dogecoin, a 2013-born joke cryptocurrency fashioned after the Japanese dog breed. Eight years since its introduction, Dogecoin’s popularity emerged with its use as payments by sports teams, AMC theaters, and as a speculative investment vehicle thanks to Tesla CEO Elon Musk’s social media endorsements of the token.
DOGE price underwent an incredible upside boom in the first five months of 2021, rising more than 15,000% amid a retail-led frenzy. In doing so, the king meme token reached its record high of $0.76 on May 8, only to correct by over 68% to trade around $0.23 at press time.
DOGE/USD daily price chart. Source: TradingView
Overall, Dogecoin went through extreme trends in the previous 12 months, starting with a long period of consolidation and eventually following it up with an extended bullish breakout, and further by a massive price correction.
So it appears, Shiba Inu’s price trends in recent months took cues from Dogecoin’s consolidation and breakout phases, as the SHIB/USD chart shows below.
SHIB/USDT daily price chart featuring Dogecoin’s three phases. Source: TradingView
A Dogecoin-like 1,500% price boom in the Shiba Inu market puts its long-term profit target near $0.00013500. Nonetheless, the fractal also warns about massive, periodical price corrections toward the 20-day exponential moving average support (the green waves in the charts above) as the price increases.
The overall Shiba Inu dominance on the cryptocurrency market has surged from 0.16% to 0.91% MTD. On the other hand, Dogecoin’s control on the market has reduced from 1.5% to as low as 1.20% in the same period.
SHIB price macro fundamentals
Joe Wiesenthal, editor at Bloomberg Markets, noted that Shiba Inu has “advanced smart-contracting capabilities,” making it better than Dogecoin.
“You can check out Shibaswap, a Uniswap-like decentralized exchange for the SHIB community. It’s got NFT, liquidity mining. All of it. Meanwhile, Dogecoin doesn’t have any of this right now.”
As Cointelegraph covered, the recent SHIB price rally may have also taken cues from the Monday launch of the Shiboshi Social Club. This online community rewards exclusive perks to people who own exclusive Shiba Inu-generated Non Fungible Tokens (NFTS), dubbed Shiboshis.
As a result, retail appears to have been tailing Shiba Inu’s speculative bull run, with a recent study by Bacancy Technology showing that it received 2.8 million Google searches on average in 2021, the third-highest after Bitcoin and Ethereum.
In comparison, search volume of Dogecoin came as the sixth-largest.
Meanwhile, a petition on Change.org pleading with Robinhood to list SHIB tokens on its zero-fee trading app garnered over 500,000 signatures. Robinhood CEO Vlad Tenev said during the company’s earnings call Tuesday that they would consider adding new coins to the service portfolio, albeit without mentioning their names.
That may have pushed the Shiba Inu price to its record high Wednesday, further signaling a booming retail interest in the meme crypto.
“Memes have value and have been an investible thesis in 2021,” Jonathan Cheesman, head of over-the-counter and institutional sales at crypto-derivatives exchange FTX, told Bloomberg, adding:
“Lower dollar-price tokens are attractive to retail.”
Related: Shiba Inu risks drop with SHIB’s 574% October’s price rally near exhaustion
But according to Ben Caselin, head of research and strategy at crypto exchange AAX, SHIB traders should tread ahead carefully due to excessive speculation, citing prior patterns that indicate that the token would likely “shed much of its value” as it gets challenged by other meme projects.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
The U.S. dollar index (DXY) could continue its slide in Q4, according to a classic technical setup known as a “rising wedge.” The greenback’s bearish prospects may boost Bitcoin’s (BTC) price to new all-time highs as it holds above $62,000.
DXY poised for another 1.75% drop
Rising wedges are bearish reversal patterns that begin wide at the bottom but contract as the price increases. As a result, the trading range narrows, which makes the rally unconvincing. That typically prompts the price to break below the wedge’s support line and later fall by as much as the maximum distance between the pattern’s trendlines.
The DXY has been forming a similar price structure since August. Moreover, the index’s decline this week had it break below the wedge’s support line, therefore triggering a bearish setup toward 92.416, down about 1.75% below the level of breakout (around 93.98).
A week ago, DXY reached a one-year high of 94.563, reaping the benefits of stagflation fears and the Federal Reserve’s decision to unwind its $120-billion-a-month asset purchase program in November, followed by interest rate increases next year.
But the index dropped to a three-week low on Oct. 19, underscoring that money markets have priced in the Fed’s tapering decision. Instead, their focus has shifted toward policy normalization elsewhere, including the United Kingdom, where analysts have forecasted rate hikes worth 35 basis points by the end of this year.
Bitcoin rallies on ETF FOMO
Bitcoin price found support from the weaker dollar this week, in addition to optimism about the debut of the first exchange-traded fund (ETF) tied to BTC futures on the New York Stock Exchange.
BTC/USD has rallied by over 40% month-to-date to hit a five-month high of $62,987 on Oct. 19. A minor correction ensued, but Bitcoin held $62,000 as its interim support against a weakening dollar sentiment.
Technically, Bitcoin reached the bullish exhaustion level of its prevailing ascending channel range. With its relative strength index (RSI) also overbought with a reading above 70 on the daily timeframe, the cryptocurrency could undergo an interim price correction with a short-term support target near $60,000.
But long term, multiple analysts anticipate Bitcoin’s price to hit $100,000.
Tom Lee, co-founder of Fundstrat Global Advisors, said in a note on Oct. 18 that ETFs based on Bitcoin futures would together attract more than $50 billion in inflows in the first year, adding that BTC could conceivably rise to $168,000 in response.
Related: BTC price is up 50% since China ‘selflessly’ banned Bitcoin mining
Jurrien Timmer, director of global macro at Fidelity Investments, noted that Bitcoin would become a six-figure asset by 2023, citing Metcalfe’s law, which measures a network’s value based on its growth rate.
“Other technology innovations, and even, like, a stock like Apple — not that I’m a security analyst — has gone through that same process, where its sales go up 38-fold over 10, 20 years, and its market value goes up by 900-fold,” Timmer
Bitcoin (BTC) looks to reclaim $45,000 on Oct. 1 as the U.S dollar retreated lower after hitting its one-year high. Bitcoin’s tight inverse correlation with the greenback over the past month suggests that a weakening dollar could push BTC price even higher in the coming sessions.
Bitcoin-dollar correlation on hourly chart. Source: TradingView.com
Dollar drops following labor market shock
In detail, the U.S. Dollar Index (DXY), which measures the greenback’s strength against a basket of six foreign currencies, including euro and sterling, hit $94.50 Thursday for the first time since Sept. 28, 2020. But it retreated on news of rising U.S. jobless claims against the forecasts of a decline.
The labor data released Thursday showed that the number of jobless claims rose to 362,000 last week against 351,000 a week earlier and against the economists’ projection of 333,000. As a result, the number of reapplications got stuck around 2.8 million for five weeks in a row.
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For the markets, this could be the news that the Federal Reserve might delay tapering its $120 billion asset purchasing program from November to a later month, thus keeping interest rates lower and the dollar’s renewed strength temporary.
DXY daily price chart. Source: TradingView.com
The index was trading at 94.263 at the time of this writing.
Technical outlook projects Bitcoin higher, dollar lower
Technicals also showed the greenback facing the prospect of a correction ahead. For example, independent market analyst TradingShot spotted the dollar index inside a Megaphone pattern, about to get topped out to pursue a correction in the coming sessions, as shown in the chart below.
US dollar index daily price chart featuring Megaphone technical setup. Source: TradingShot, TradingView.com
“Based on the 1D relative strength index (RSI), it appears that DXY is right at the top of the formation as [it was] on Aug 15, 2018,” TradingShot wrote.
“DXY is building up a strong pull-back to the bottom of the Megaphone.”
Meanwhile, a recent bout of selling in the Bitcoin market lately had it paint a Falling Wedge pattern. In detail, Falling Wedges appear when the price trends lower inside a channel comprising of two diverging, descending trendlines.
Traditional analysts see the Falling Wedge pattern as a bullish reversal indicator, noting that a break above its upper trendline moves the price higher by as much as the maximum distance between the Wedge’s trendlines.
The structure’s maximum height is roughly $10,000. As a result, the Bitcoin price can at least retest $50,000 should the Wedge breakout play out as intended.
A weaker dollar means stronger Bitcoin
On the other hand, the underwhelming jobs report could boost investors’ interim appetite for Bitcoin.
Related: Bitcoin’s sharp fall from $50K linked to stronger US dollar, gold — Correlation shows
Vasja Zupan, president of Matrix Exchange, told Cointelegraph that the dollar’s weakness and devaluation against rising inflation would continue to make investors put their excess cash in crypto markets. He said:
“Bitcoin in its core proposition has an integrated hedge against inflation and therefore persistently higher inflation in the U.S. can only push it upwards. Therefore, in the long term, the dollar’s worth will continue to be lesser than Bitcoin.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Cambodia’s central bank is working towards widespread adoption of its central bank digital currency (CBDC) with the ultimate aim of eliminating the US dollar hegemony in the country.
Project Bakong to Eliminate USD Dependence
Speaking to Nikkei Asia, the director-general of the National Bank of Cambodia (NBC) Chea Serey, noted that Project Bakong has witnessed an exponential increase in the number of users. According to the NBC director-general, the adoption of digital payments was majorly due to the COVID-19 pandemic.
The Cambodia government first announced its intention to issue a digital currency back in July 2020. By October, the NBC launched Bakong, which was in collaboration with other commercial banks and a Japanese tech firm Soramitsu Co, which developed the underlying blockchain architecture.
By June 2021, the number of users utilizing the Bakong electronic wallet rose to 200,000, which was twice the number of users registered in March. Also, the first half of 2021 recorded 1.4 million transactions valued at $500 million, while the CBDC’s system has a reach of almost 6 million users.
The Cambodian CBDC project was developed to eventually erase the US dollar’s hegemony in the country, by encouraging the widespread use of the riel. However, the NBC director-general noted that having the Bakong would not be enough to displace the USD from the Cambodia economy. According to Serey, “having a stable exchange rate and inflation rate, as well as economic growth prospects” need to be in place.
Apart from plans to disrupt the US dollar’s hegemony in the country, the central bank is also looking to use the Bakong for cross-border settlements. The NBC executive said that such use of the Bakong would help Cambodia women working overseas to safely and effectively send money to families back home.
The Bakong is the second CBDC which has seen nationwide use after the Sand Dollar by the Bahamas. Meanwhile, more countries continue to explore and issue digital currencies. As reported by BTCManager in July, the Central Bank of Nigeria (CBN) said that it was planning to launch its digital naira pilot program later in October.
South Korea’s central bank, on the other hand, selected Ground X as its technology partner for its digital won project. China, meanwhile, continues to lead with extensive digital yuan trials in different parts of the country.
Gold is set to outperform Bitcoin (BTC) in the second quarter of 2021.
An ounce of gold has surged from $1,707.45 on April 1 to over $1,750 in the still-running June 30 session. That marked a roughly 3.9% jump over the quarter. Meanwhile, Bitcoin has plunged by more than 40% to below $35,000 after topping out near $65,000 in mid-April, all in the same period.
The inverse correlation between Bitcoin and gold markets surged specifically in April and May 2021. Analysts at JPMorgan noted in May that large institutional investors rotated their money out of the overvalued crypto markets to seek upside opportunities in gold.
Referring to the Bitcoin Futures data on the Chicago Mercantile Exchange (CME), JPMorgan analysts said that investors have been liquidating their positions from as back as October 2020. Meanwhile, capital inflows into gold-enabled exchange-traded funds have increased in correspondence to Bitcoin market outflows. An excerpt from the report reads:
“The bitcoin flow picture continues to deteriorate and is pointing to continued retrenchment by institutional investors. Over the past month, bitcoin futures markets experienced their steepest and more sustained liquidation since the bitcoin ascent started last October.”
Bitcoin and gold trended almost inversely in the first two months of Q2. Source: TradingView.com
The bank noted that institutional investors may have treated Bitcoin as an overbought asset, especially as the flagship cryptocurrency surged from $3,858 in March 2020 to just shy of $65,000 by April 2021—a 1,584% gain. Meanwhile, gold topped out at $2,075.82 per ounce in August 2020, after which it dropped to as low as $1,676.866 an ounce in March.
Safe-haven fight
The rotational investment strategy from Bitcoin to gold also picked momentum after Elon Musk criticized the cryptocurrency for its carbon footprints, insomuch that he suspended accepting it as payment for his Tesla electric car range.
On May 19, right after Musk doubled down his attack on the Bitcoin market, stating that he might have Tesla unload its entire $1.5 billion BTC stash, Bitcoin crashed by roughly 30%. The bearish bias increased also after China announced a complete ban on cryptocurrency activities, including mining-related operations that contributed a large chunk of the Bitcoin network’s total computing power.
Bitcoin closed the May session at a 35.5% loss. On the other hand, gold benefited from the FUDs in the crypto market, rising 7.6% in the same month.
Investors picked gold over Bitcoin as a safer haven also as they feared higher inflation is around the corner. As a result, the precious metal surged 3.78% in April as consumer prices in the US rose at their best momentum in over a decade, to 4.2%. The next month—as stated above—saw gold continuing its rally alongside a similar upside tick in the consumer price index, which surged to 5%.
Core PCE, the Federal Reserve’s preferred metric to gauge inflation, jumped to at an annual rate of 3.4% in May, the highest in 29 years.
Jerome Powell, the Federal Reserve chairman, appeared adamant about the rising inflation as he called the price rises “transitory in nature.” He further stressed that the central bank would maintain its expansionary fiscal programs to protect the U.S. economy against the economic aftermath of the coronavirus pandemic.
Fed has been keeping interest rates near zero and has been purchasing $120 billion worth of government bonds and mortgage-backed securities every month since March 2020.
Bloody June
June appeared as the only month in the second quarter that saw Bitcoin and gold trending in tandem.
Bitcoin and gold attained a positive correlation in June against Fed’s surprising hawkish tone. Source: TradingView.com
The assets traded flat in days approaching the Federal Open Market Committee’s two-day policy meeting in June’s second week. Fed officials announced that they might hike interest rates twice by the end of 2023, a year earlier than anticipated, to contain excessive inflation rates.
Both Bitcoin and gold fell in tandem after the Fed’s hawkish tone. Gold, in particular, looked at prospects of logging its worth monthly performance in June since 2016. It was down 7.42% at publishing time.
Meanwhile, Bitcoin had fallen by more than 8.5% in the same period.
What’s next for Bitcoin and gold?
A survey of leading economists conducted by Financial Times found that a majority of them expect the Fed to raise interest rates at least twice by the end of 2023, aligning accurately with the central bank officials’ dot plot.
Economists expect 50 basis point higher rates by December 2023. Source: Financial Times
Carsten Fritsch, an analyst at Commerzbank AG, recommended watching the US dollar to gauge gold’s strength in the coming sessions, noting that June’s major drag on the precious metal appeared because of a strengthening greenback.
The U.S. dollar index, a benchmark to measure the dollar’s strength against a basket of top fiat currencies, rose to a one-week high at 92.433 on Wednesday.
US dollar index reaches one-week high as gold falls. Source: TradingView.com
“Gold repeatedly failed to overcome the 100-day moving average in recent days, which was a bearish sign,” Fritsch told Bloomberg. “There is a risk now that so far, patient ETF investors jump on the bandwagon and sell their holdings. This would amplify the downward move.”
At the same time, Bitcoin bulls received similar warnings as the cryptocurrency grappled repeatedly with the risks of falling below $30,000, a psychological support level.
Jill Carlson, a venture partner at Slow Ventures, told CNBC that institutional outflows from the Bitcoin markets had picked momentum recently, adding that traders need to be “cautiously bullish” on the cryptocurrency.
Clem Chambers, the CEO of financial analysis portal ADFVN.com, predicted another leg down for Bitcoin, noting that breaking below $30,000 would put the cryptocurrency on the path toward $20,000.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
