Bitcoin explodes, US dollar pulls back

Bitcoin approaching record highs

An eventful few weeks saw the dollar briefly come back into favour as vaccine news invited the prospect of a W-shaped recovery. Traders flirted with the idea that all may be good from next spring but that enthusiasm appears to have faded and the dollar and yields have corrected themselves a little.

Improved risk appetite has also been good for those currencies that have struggled at the low points of the pandemic and that have been more associated with periods of optimism. With London and Brussels seemingly closing in on a Brexit deal, the pound and euro are doing quite well and eyeing the summer highs against the greenback.

It’s actually in the crypto space where the big moves are happening. Bitcoin has exploded again this week after holding above $16,00 for a few days, only to rally another 15%, falling just shy of its all-time highs of almost three years ago. It’s surely only a matter of time until a new high is achieved. However, there is something about the immense gains of the last month that make me a little nervous, given past experience.

It has been a frantic few weeks for the markets. More vaccine news, the first rollout, the winter Covid surge, central bank bazookas, Brexit and the tumultuous US election. The presidential transition, normally a smooth and dull affair, could end up being the best show in D.C., and a market-mover as well. Donald Trump is not leaving the White House without a fight, nor is he likely to accept the role of lame-duck President. If he’s going to leave, he’s not going to go quietly. With no shortage of risks in the final six weeks of 2020, investors can expect the markets to remain busy.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst - UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a Market Analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam