Pt14. What is the relationship between Gold Prices and the US Dollar?
Strong US Dollar, Not ICOs, Drove Recent Cryptocurrency Market Decline: Analyst
The cryptocurrency markets experienced a slight pullback on Thursday but have more or less managed to maintain the midweek recovery that followed Monday’s massive sell-off.
, Gold Usd Correlation
— to ICO-funded startups cashing out their capital before the market takes an even further dip. Arthur Hayes, CEO of cryptocurrency derivatives exchange BitMEX, added that he
nervous VCs will soon begin moving out of their ICO tokens and ether holdings, which he forecasts will ultimately drive the ethereum price below $100.
, believes that this assessment misses the mark. Writing in market commentary made available to CCN, Greenspan argued that the crypto market’s movements this week have correlated with fluctuations among local currency values in emerging markets, Greenspan argued that the crypto market’s movements this week have correlated with fluctuations among local currency values in emerging markets Gold Usd Correlation
This USD breakout caused the value of emerging markets currencies to plunge, and Greenspan says that there are signs — including spikes in blockchain activity — that suggest this pullback spilled over into cryptocurrencies. It’s true that investors in these markets often increase their cryptocurrency holdings when their local currencies weaken, but — for all its alleged faults — the dollar is still the reserve currency of choice for most investors worldwide.
“As the United States moves to tighten its economy and avoid strong inflation, they’re taking action that is strengthening the Dollar. Because the US Dollar is the global reserve currency, many smaller economies rely heavily on a stable exchange rate with the greenback,” Greenspan wrote. “So too, as the Dollar is being seen as a stable store of value at the moment, there really isn’t much incentive for people to store their money in digital assets.”
“Over the course of this week, it seems that cryptocurrencies have been reacting negatively to the surging US Dollar. In this sense, they’ve been acting a lot like traditional commodities,” he added in an emailed statement to CCN. “Usually, when the Dollar goes up assets like gold and oil go down in relation. Over the last week both digital gold and real gold have fallen sharply in the face of the rapidly rising Dollar.”
USD has pulled back somewhat against emerging markets currencies. | Source: eToro
However, the dollar rally has hit a speed speed bump over the past several days, enabling currencies like the Lira, Rand, and Peso to recoup some of their losses.
That USD pullback, perhaps not coincidentally, coincided with a midweek crypto-renaissance, enabling the cryptocurrency market cap to add nearly $20 billion after briefly dipping below $190 billion on Monday.
So why is bitcoin standing out from the pack, even as the overall market struggles against a stronger dollar? It may be, to
, because “bitcoin is the best house in a tough neighborhood.” Gold Usd Correlation
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Josiah is an assistant editor at CCN. A former ancient and medieval literature teacher, he has been reporting on cryptocurrency since 2014. He lives in rural North Carolina with his wife and children. He holds investment positions in bitcoin and other large-cap cryptocurrencies. Follow him on Twitter @Y3llowb1ackbird or email him directly at josiah.wilmoth(at)ccn.com.
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