Gold correlation shows that Bitcoin’s sharp decline from $50,000 is related to the strengthening of the U.S. dollar


Bitcoin (Bitcoin) And spot gold (XAU) hovered below their key psychological levels on September 8, as the strength of the U.S. dollar suppressed investors’ appetite for hedging assets.

BTC/USD exchange rate Fell 5.27% to an intraday low of $44,423 However, after recovering the US$45,000-46,000 range as support, part of the loss was made up. The currency pair’s rebound also continued its continued rebound from US$42,830, which was touched on Tuesday after falling by more than 18% during the session.

Hourly chart of BTC/USD. Source: TradingView.com

The massive sell-off of Bitcoin coincided with a strikingly similar but dwarfed decline in its rival gold market. Specifically, precious metals suffered their worst one-day decline in a month on September 7, as the exchange rate of spot gold against the US dollar fell below US$1,800 after falling 1.37% during the session.

XAU/USD hourly chart. Source: TradingView.com

The big red hourly candles on the gold and bitcoin charts appear between 10:00 and 11:00 UTC. However, compared with Bitcoin, which continued its downtrend, precious metals have traded sideways after falling sharply.

In detail, cryptocurrencies are Over-leveraged bullish betsAccording to ByBt’s data, in the past 24 hours, long positions worth about $3.68 billion in the Bitcoin options market were liquidated, the largest liquidation since June.

Bitcoin liquidation in the past 24 hours. Source: ByBt.com

Automatic liquidation caused additional selling in the Bitcoin market as traders were forced to sell their BTC holdings to cover margin calls.

Is the sharp drop in the dollar the culprit?

It’s worth noting that the sudden drop in Bitcoin and gold prices coincided with The dollar index soared (DXY).

The index measures the strength of the US dollar against a basket of major currencies. It rose 0.41% to 92.53 on Tuesday, and continued to climb in the current trading day, closing at an intraday high of 92.73.

DXY hourly price chart. Source: TradingView.com

DXY broke from a one-month low and benefited from U.S. Treasury yields rise Prior to the government bond sale this week, it included $58 billion in three-year bonds, $38 billion in 10-year bonds, and $24 billion in 30-year bonds.

After the weak non-farm payrolls report was released on Friday, the benchmark U.S. 10-year Treasury bond yield was about 1.32%, rising to 1.377% on Tuesday. As of press time, it was 1.351%.

U.S. government bond 10-year yield. Source: TradingView.com

The outlook ahead of the Fed meeting is mixed

Rising yields often compete with Bitcoin and gold for safe-haven funds.But despite the recent climb, it is still below Core inflation of 5.4% in July, Thus using non-yielding safe-haven assets as a more attractive bet on consumer price increases.

But with the Fed Plans to start reducing its $120 billion monthly asset purchase mechanism At the end of this year, some analysts believe that bond yields will continue to rise. In turn, they will provide bullish support for the U.S. dollar.

Shaun Osborne, Chief Foreign Exchange Strategist, Scotiabank in Toronto Tell CNBC:

“We believe that the Fed may still gradually reduce its scale before the end of this year, and the US economy may perform relatively strong. Therefore, our view is that the dollar has fallen slightly, and a slight weakening of the dollar may be a buying opportunity.”

related: Bitcoin price will reach $100,000 in 2021 or early 2022: Standard Chartered Bank

On the other hand, the rising increment variant of Covid-19 May inhibit recovery prospectsIn turn, this will force the Fed to maintain its expensive bond purchase program, thereby limiting yields and the U.S. dollar.

Therefore, the prospects for Bitcoin and gold look mixed. The Federal Open Market Committee meeting later this month is expected to further clarify the reduction schedule.

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