- Bitcoin fails again to breach past $11,000 for the sixth time in six days
- Analysts point to the strengthening dollar for Bitcoin’s price decrease
- The U.S. dollar and Bitcoin are inversely correlated with each other
Bitcoin has seen another major drop in price as analysts point to the continued strength of the dollar as a major catalyst for the price decrease this week.
Bitcoin opened Monday at $10,924 only to close at $10,411, a significant 4.5% decrease that wiped out any gains from the past seven days. This is also Bitcoin’s first major drop following what happened on Sept. 3, when Bitcoin decreased from $11,392 to $10,141. This is also the sixth time in six days that the price tried to break past $11,000. This time, the reaction was violent, pushing the price further down to $10,290 before closing at $10,411.
Analysts pointed to the growing strength of the U.S. dollar as one possible reason for the decline of Bitcoin’s price.
The benchmark cryptocurrency has been inversely correlated with the greenback. In the midst of the coronavirus pandemic, Bitcoin and gold were perceived as stores of value versus the dollar, which was weakened by quantitative easing and debt. According to news outlet Bitcoinist, analysts are counting on the weaker dollar narrative to drive the price of the benchmark cryptocurrency higher. The federal stimulus and lower interest are the primary factors associated with the weakening of the dollar.
However, according to financial news outlet Seeking Alpha, the dollar’s weakness has come to an end and it expects a dollar bull run until the second quarter of 2021. The publication noted the strength of the U.S. Capital Account, or the measurement of capital inflows versus outflows in the U.S. economy. It also pointed out that because everyone is shorting the greenback, there’s nobody else left to add to the dollar shorts.
“Which means that absent some unexpected socioeconomic disaster in the US, the only possible move for the dollar at this point is higher,” the publication concluded.
As Bitcoin’s strength continued to decline, it dragged the entire cryptocurrency market to significant decline in price within the last six days. Ethereum, the second largest cryptocurrency is down to $339, a 28% decline from its 2020 high of $475.