Bitcoin hits record, USD weakness returns

Bitcoin eyes USD20,000

Bitcoin investors are confidently laughing at skeptics that call the latest rally another Dutch tulip mania-type event, citing this time is different and filled with long-term bullish institutional bets.  After the Thanksgiving slump which almost tested the USD16,000 level, Bitcoin has steadily rallied back above the USD19,000 level and has hit an all-time high as interest grows and macro arguments seem bulletproof in the short-term.  Monetary and fiscal support will remain elevated in the short-term and that is creating a diversification trade against not just the dollar but for gold as well.

Bitcoin and all the major altcoins are rallying strongly, and it seems the momentum trade is strengthening as mass media outlets embrace crypto coverage.  Bitcoin rallied to an all-time high today and appears poised to take out the USD20,000 level.

US dollar retreats

The euro tentatively tested the 1.20 level as dollar weakness returned as investors begin to price in a Biden administration that will see coordinated monetary and fiscal efforts early next year.  The dollar will become a punching bag over these next few months as the next wave of stimulus gets unleashed.

The euro held onto gains even after ECB President Lagarde noted that the EU fiscal package “shouldn’t be allowed to be delayed significantly.”  Lagarde also reiterated that interest rates will stay low for quite some time.  The uncertainty for Eurozone stimulus is not as great as it is for the US and that should allow it to ride the euro wave until the ECB attempts to talk down their currency.

Risk aversion has somewhat returned and safe-haven flows have helped the dollar pare losses. Investors will be keeping a close eye on this week’s employment releases, which could be the tipping point to make Congress deliver much-needed relief as many unemployment benefits and loan moratoriums expire at year-end. A weak nonfarm payroll release could weigh on the US dollar.

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