Conventional wisdom holds that if the dollar is stronger, assets such as cryptocurrencies get cheaper. Yet is that really the case? lvlewitinn writes for this week’s Crypto Long & Short newsletter.
Conventional wisdom holds that if the dollar is stronger, assets such as cryptocurrencies get cheaper. Yet is that really the case?
Higher interest rates fuel demand for dollars . The U.S. Dollar Index, which measures the greenback against a basket of six foreign currencies, is now trading at a 20-year high after surging about 20% in the last year. In that time, bitcoin has dropped a whopping 58%. Nonetheless, it’s worth cautioning that one shouldn’t read too much into this. After all, crypto is still in its nascent stages compared to other asset classes. It has its own idiosyncrasies and prices move for reasons other than, say, dollar strength.
Furthermore, prices often appear to move in relation to the market’s attitude toward risk. Cryptocurrencies are still very much “risk on.”Losses since CPI Announcement on September 13, 2022, Sept. 13-20, 2022
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