Bitcoin Is Now Directly Correlated With The US Dollar

Dalmas Ngetich

2 years ago

2 mins read

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In the ongoing banking crisis in the United States, the US Dollar (USD) appears to correlate directly with Bitcoin.

Bitcoin Positively Correlates With USD

According to Kaiko, a digital assets market provider, Bitcoin, the most valuable cryptocurrency, appears to be moving synchronously with the USD as the market adopts a wait-and-see approach amid fear of further turbulence in the United States financial markets.

Historically, #Bitcoin has had an inverse correlation with the U.S. Dollar.

Over the past month, this negative correlation has mostly disappeared amid a wider market rally. pic.twitter.com/Q9H0T4k51M

— Kaiko (@KaikoData) March 17, 2023

Historically, Kaiko notes, Bitcoin moves inversely with USD. That means whenever the USD rallies, Bitcoin tends to crumble. This has been observed in the last few months, especially throughout 2022, resulting in what was known as the crypto winter.

As USD strengthened across the board in 2022, crypto prices, including BTC, weren’t spared. To illustrate, Bitcoin crashed from as high as $69,000 registered in November 2021, dropping below $20,000 in November 2022.

The crypto meltdown was made worse by the collapse of UST, an algorithmic stablecoin by Terra, the crash of several centralized finance projects like Voyager Digital and BlockFi, and the spectacular fall of FTX, the Sam Bankman-Fried exchange in November.

The bankruptcy and failure of some of these platforms dented user confidence, forcing a capital flight to safe havens beyond the crypto markets to gold and the USD.

At some point in 2022, for example, DXY data, an index that tracks the USD, showed that the greenback strengthened by over 20%.

U.S. Dollar Index On March 17| Source: TVC On TradingView

During that time, BTC more than halved, demonstrating the relationship between the USD and Bitcoin.

The DXY measures the strength of the USD against a basket of other currencies, including the Japanese Yen, Euro, Chinese Yuan, and others. The index will rise if the USD is strong and dip if it falls relative to these currencies.

The Tide Is Changing

As of mid-March 2023, Kaiko observes that rallying Bitcoin and crypto prices seems to coincide with the relative strengthening of the USD; and is shifting. When BTC prices rose from $19,700 last week to $26,300, the USD added 3% from late February 2023. The USD holds firm despite questions being raised concerning the monetary policy approach adopted by the Federal Reserve.

There have been more questions about the effectiveness and the speed of rate hikes in the past few months. Although inflation is lower, it is not at ideal levels.

The Fed aims to eventually reduce inflation to around the 2% benchmark level. While critics descend on the Fed, the USD is steady, syncing with Bitcoin, that’s relatively higher.

Feature Image From Canva, Chart From TradingView

Dalmas Ngetich

Dalmas, a seasoned crypto reporter, brings a unique perspective to the industry. His specialization in NFTs, blockchain, DeFi, and blockchain news for NewsBTC, combined with a background in mechanical engineering and over a decade of experience in journalism, has allowed him to craft over 10,000 news and feature articles over the past eight years. His diverse range of topics, including technology, Forex, and finance, reflects his comprehensive understanding of the crypto landscape.

His technical expertise and analytical skills have been recognized and featured by leading news outlets such as Investing.com, CoinTelegraph, Entrepreneur, Forbes, and other authority sites. Notably, he broke key news, including the Ripple and MoneyGram partnership, cementing his position as a thought leader in crypto.
The news exploded. Over 100,000 people devoured this meticulously crafted report, from seasoned investors to curious newcomers. His analysis wasn't just dry facts and figures; it crackled with insight, dissecting the implications of the partnership and its potential impact on the future of finance.

His deep understanding of the financial markets, technological advancements, and blockchain developments has made him a respected voice in the industry.

Dalmas is also the founder of BTC-Pulse, a crypto news site, further demonstrating his commitment to the field. He firmly believes that DeFi and NFTs are here to stay and will continue to drive financial inclusion.

Coming from Nairobi, Kenya, it is easy to see the source of his inspiration: Across Africa, millions lack access to traditional banks. Remote villages, limited documentation, and high minimum balances create insurmountable barriers.

DeFi, not just Maker or Aave, for example, but think of Bitcoin and USDT, cuts out the middleman. Forget banks with their limitations.
Even so, DeFi isn't a magic solution. The continent still struggles with reliable internet access, and educational campaigns highlighting the benefits of this wonderful solution are insufficient. Moreover, even for those interested, understanding DeFi can look like learning a new language.

Dalmas is here to help make the tech easy to understand and digestible, even for beginners.
The story of DeFi in Africa is still being written. Challenges abound, but the promise of a more inclusive financial future is a powerful motivator. With innovation and collaboration, Dalmas firmly believes that DeFi could become the key to unlocking Africa's full economic potential.
This possibility and its immense value motivate Dalmas to continue breaking key DeFi innovations and more across the globe. His engineering background further enhances his ability to deliver well-thought-out pieces that blend technical insight with clear, impactful reporting.

Beyond his professional achievements, Dalmas is deeply passionate about technology and politics. Policies drive adoption, and being at the forefront and keeping up with how they evolve is crucial for the sphere to mature.

When Dalmas is not closely monitoring the latest crypto events, he can be found in nature, exploring the picturesque countryside, and traveling with his family and friends. His love for adventure and discovery perfectly complements his investigative and reporting skills.
You can connect with Dalmas on X: @Dalmas_Ngetich, or contact him on Telegram @Dalmas_Ngetich.

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