A major part of Bitcoin's (and gold's) recent strength has to do with dollar weakness
As the coronavirus pandemic took the world by storm earlier this year, central banks around the world responded in much the same way.
They decided they were going to support their economies via monetary stimulus.
And if there wasn't enough available funds for said stimulus, they were simply going to print more.
This increase in the money supply is likely going to have very real and predictable effects.
Specifically as far as the US is concerned, a drop in the dollar and rise in assets that are priced in dollars.
And right on que the dollar is falling to its lowest levels in over 2 years:
(Source: https://www.tradingview.com/symbols/TVC-DXY/)
As the dollar slides - gold, silver, and bitcoin soar
As I mentioned above, basically anything priced in dollars benefits from a falling dollar.
Some examples of how these popular assets have performed:
- Gold trading near its all time highs, currently around $2k
- Silver up roughly 30% in July, currently trading around $24
- Bitcoin currently up 53% on the year, trading near $11,100
The most interesting thing about these gains is that the biggest moves have come within the month of July, which is also where the dollar has seen it's biggest decline.
Gold and silver were the first to really benefit from the weaker dollar, but bitcoin finally joined in on the fun early this week.
More pain to come for the dollar?
The dollar has fallen pretty far, pretty fast.
And many are expecting it to fall further given the US and several other countries are on the verge of launching more stimulus programs.
However, it is possible that the dollar is already pricing in this next round of stimulus.
For the dollar to continue to weaken over the medium term we will need much of this stimulus to actually make its way out into the broader economy.
That is something that never really happened with the massive stimulus programs that were launched back in 2009 and 2010 in response to the Housing Crisis.
These stimulus programs are much different, however, as they are much more targeted at helping the individual consumers than they were back in 2009, which means much of this newly created money will likely circulate throughout the economy.
Which means, in the medium term, I think the weakening dollar will continue.
Stay informed my friends.
-Doc
Posted Using LeoFinance
I see Bitcoin and Ethereum are up. Do you think Ethereum has a better multiple for investors? I am wondering if Bitcoin takes off this August as people are predicting Ethereum could hit 1000$?
if that happens i will be so pleased i will prance about naked!
It could happen, so be prepared.
I am, I have removed my pants :)
What do you mean by multiple? Usually people use the term multiple when referring to the price of a company's stock as it relates to their earnings...
Multiple. Like 2x or 3x or 20x as in when you measure your gain in units of 100% profit