Bitcoin (Bitcoin) The price has fallen by more than 40% Close to $65,000 In mid-April. But this is not enough to disrupt the long-term bull market trend of flagship cryptocurrencies, especially as the global market struggles to cope with the prospect of national currency devaluation and commodity market collapse.
Mike McGlone, senior commodity strategist at Bloomberg Information, believes that on Wednesday, diversified investment in value storage assets is a wise strategy to deal with the bleak outlook of currency and commodity markets.
“Compared with similarly devalued currencies, the risk of a depreciation of the U.S. dollar is small, which means that in our view, diversifying investment in value storage assets such as gold and Bitcoin is just a prudent move,” he said. Tweet on Wednesday.
The money printing machine is broken
Magron’s bullish metaphor refers to the recent surge in funds injected into the US and Eurozone economies.U.S. money supply M2, a measure of money supply Including cash and check deposits (M1) and quasi-currency, Reached US$20.256 trillion on May 3, 2021USD 15.384 trillion on February 10, 2020.
The excess liquidity injected into the U.S. economy has caused the U.S. dollar to weaken against major foreign currencies. As a result, as of June 16, the U.S. dollar index (DXY) fell by nearly 11.22% from its high of 101.947 in mid-March 2020 to 90.5.
At the same time, the euro area money supply M2, that is, the money supply in the European Union, soared from 5.6 trillion euros in February 2020 to more than 14 trillion euros in March 2021
However, despite the oversupply of the euro, the euro is still rising against the dollar. Nomura International Group of 10 foreign exchange analyst Jordan Rochester pointed out that the European government’s response to the coronavirus pandemic is coordinated. Capital flows out of the U.S. market into the Eurozone economy.
On the other hand, due to the promise to protect investors from higher inflation, the price of Bitcoin against the U.S. dollar and the Euro rose at a supersonic speed. Although the BTC/USD exchange rate jumped from 3,858 U.S. dollars in March 2020 to slightly more than 40,000 U.S. dollars in June 2021, the BTC/EUR exchange rate soared from 3,363 Euros to approximately 32,000 Euros during the same period.
The recent US Consumer Price Index report shows that the inflation rate reached 5% in May 2021, the highest level since 1992. In Europe, the overall price growth rate reached 2%, exceeding the target of the European Central Bank (ECB).
At the same time, the President of the European Central Bank Christina Legarde (Christina Legarde) Say They will continue to buy bonds, worrying that any form of reduction will undermine the recovery of the euro zone.
Fed officials also expect that they will ease inflationary pressures when the two-day Federal Open Market Committee policy meeting ends on Wednesday. Previously, the Fed stated that the CPI increase in April and May was “temporary.”
Many people worry that the Fed’s current policy is preparing for (we have already seen) high inflation. Inflation is bullish on asset prices, and the b/c dollar value is low. Even if the asset value is the same, its underlying dollar value is also lower. The number of BTC rises
-Jonny Moe (@JonnyMoeTrades) June 16, 2021
Commodities move forward in shock?
Investors who believe that hedging assets such as Bitcoin are more risky choose to maintain hedging in relatively less volatile market areas such as commodities. Copper is a weather vane of macroeconomic health, as investors look for safe havens for currency depreciation, so it soared 67%. Metals such as aluminum and zinc have also reported substantial upward trends.
But China recently proposed a plan to curb rising commodity prices. The National Food and Strategic Reserve Administration said on Wednesday that it will increase the supply of metals such as copper, aluminum and zinc for use by manufacturers.
-Joe Weisenthal (@TheStalwart) June 16, 2021
McGraw hinted that the prospect of falling commodity prices also means huge investment opportunities in the gold and bitcoin markets.