Jay HaoThe CEO of OKEx, one of the world’s largest cryptocurrency exchanges, notes that the US dollar decline and Bitcoin surge (BTC) have recently occurred simultaneously.
Hao points out that US Treasury bond rates have been regularly adjusted downward along with historic quantitative easing policies.
He argues that these guidelines resulted in many US dollars being sold, which contributed to a decline in the dollar index. He reveals that recent data shows the US dollar index fell below 93 – its lowest point in 2020 and a two-year low as well.
Hao also notes that short positions in the US dollar derivatives market have hit new highs since April 2018.
He claims global hedge funds are placing bets on a further decline in the US dollar: he reveals that the total or total bear bet on USD has increased nearly $ 5.3 billion to $ 24.5 billion this week.
“From the point of view of correlation, the correlation between bitcoin and US dollar and gold and US dollar decreased, while the correlation between bitcoin and gold increased. The price reaction to this is that both gold and bitcoin have skyrocketed against the backdrop of a falling US dollar index. “
“The rise in the price of gold can be explained by the decline in the US dollar, which has increased global demand for safe havens such as precious metals. While Bitcoin may not have reached safe haven status yet, it is another global alternative investment destination alongside gold. When gold rises to people’s psychological highs, much of the US dollars that are still being sold continuously goes to Bitcoin and other digital currency markets. “
Hao notes that data from Coinmetrics shows that the supply of Tether’s USDT stablecoin has grown steadily, particularly in July 2020 when “the upward curve steepened”. At the same time, gold’s upward momentum slowed over the same period, suggesting that more US dollars may be pouring into the crypto-asset market than before.
He also mentions that after converting those US dollars to USDT, some of them went onto the digital asset exchanges. He announced that the inflow of USDT into crypto exchanges rose by $ 282,539,130 to $ 725,857,429 on July 27, 2020 – specifically, the largest increase in a day or 24 hours since the last 143 days.
He points out that this is a large amount of USDT that has flowed into cryptocurrency exchanges, but Glassnode data shows that USDT balances on digital currency exchanges have been falling since April 2020.
Meanwhile, the total inventory of bitcoin (BTC) on virtual asset exchanges has steadily increased, according to Hao. Given these patterns, we can argue or speculate that most of the USDT that goes into exchanging digital assets was used to buy more Bitcoin, the flagship cryptocurrency, claims Hao.
“If you look at all of the data, it seems pretty clear that this time bitcoin’s spike was heavily influenced by the US dollar. It can be summarized as follows: the US dollar index has fallen → the demand for hedging has risen → the gold price has risen → the gold price has reached a psychological high → investors are looking for other alternative investment products → the USD exchange rate has been coined since the USDT has risen → more USDT flows into the exchanges → sell USDT and buy Bitcoin → the Bitcoin account balance of the exchanges increases and the price of Bitcoin increases. “