Bitcoin tumbles as USD bounces back

Dollar enjoying some long awaited reprieve

The dollar has been very much out of favour since peaking last March but recent moves in the Treasury market have given it new life.

Should risk appetite in the markets deteriorate further in the coming weeks, it could see its popularity flourish once more. Of course, that’s highly dependent on the Fed not delivering a hammer blow just as its finding its feet again.

The greenback finds itself back around the lows of the last six or seven years, levels that were last tested back in early 2018. Given how rapid its fall from grace has been, we may be seeing some profit taking kicking in just as the mood turns a little sour.

I don’t think we’re quite going to see the reversal in fortunes we saw three years ago but a little reprieve in the near-term may be on the cards.

A bump in the road for bitcoin

It’s not been a great 24 hours for cryptocurrencies, with the global market cap tumbling more than 20%, matched more or less by bitcoin which is both heavily dominant in the space and the primary driver of it. While this is a major drop in a single day, it’s worth putting it into some perspective.

The price fell to levels seen less than a week ago. A 20% drop in most markets put it into a technical bear market. With cryptos, I don’t feel that rule applies. I’d barely call it a correction. Just a little froth off the top. I wouldn’t be surprised if it reversed these declines by the end of the week, if not sooner.

I wouldn’t be too quick to cheer the passing of the crash, though. Unless we see another day or two of moves like this, it isn’t it. It’s a bump in the road.

This volatility is going nowhere and today should be a warning to anyone that thinks this only moves quickly in one direction. As the FCA warned, with bitcoin you should be prepared to lose everything.

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 SKY News. 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