Without a doubt, Bitcoin and the cryptocurrency market, in general, have some correlation with the stock market. Market experts have commented that Bitcoin is rising and falling in parallel with this traditional market for a long period of time. And they're also doing extensive studies to confirm that a correlation seems to exist between them. The article is correlated with the US Dollar. Investors should be aware of the close inverse correlation between the strength of the US dollar and Bitcoin.

A broad debate has emerged among investors over Bitcoin (BTC) 's a correlation with other markets. In different periods, Gold and Bitcoin seem to be moving in parallel. However, the correlation should be watched most closely with the dollar, simply because the global economy is dependent on the strength of this global reserve currency!

Bitcoin and cryptocurrencies should be seen only as an asset:

In fact, the US dollar is the currency of the world, so it is the standard of value for everything else, including assets as well as other fiat currencies. Many US dollar-based financial activities such as loans and settlements will increase its liquidity and widespread adoption (Negatively speaking, the US dollar represents a colonial problem. US chemical). When the world is short of US dollars, everything else falls in value against the US dollar. If the US Dollar is stable, then the price of cryptocurrencies may be affected by the monetary policy of other currencies. For example, Inflation is currently very high in Argentina, so the public wants to exchange their Argentine pesos for Bitcoin, to reduce inflation risk.

While Bitcoin and other cryptocurrencies can behave like currencies, like payments and store of value, the market cap of cryptocurrencies is quite small compared to the traditional finance industry and most. Financial activities are based on fiat money. In short, you cannot borrow Euros, then pay back Ethereum. Usually, you need to pay back Euros. In other words, securing the financial operations of cryptocurrencies is not enough. If Bitcoin and cryptocurrencies replace the financial function of traditional currencies, this could diminish the role of the US dollar and other fiat currencies, then the relationship between Bitcoin and the currencies. fiat will be different. But this is probably far from happening, and for the time being, we should just treat Bitcoin as an asset!

In the chart above, we can clearly see the inverse correlation between Bitcoin and the US dollar. For example, the COVID19 pandemic caused the dollar to rise sharply in preparation for a possible recession (stocks also plummeted). The fiscal stimulus launched as an attempt to support the economy then caused the US Dollar to decline, accompanied by a clear recovery in the stock market, bringing Bitcoin. go with it.

With all of the above considered, we can assume that Bitcoin will have some correction around this threshold, while the market remains volatile and investors will prioritize cash for benchmarking. for hedging.


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