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Breaking News: Coinbase Confirms DOJ Investigation Following Major Security Incident

Reasons Behind The Bitcoin Price Rally – Is It Sustainable?

Jake Simmons
Jake Simmons
1 year ago
3 mins read
Bitcoin

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Following the Bitcoin price’s extreme loss of volatility over the past few weeks, yesterday’s rally feels like new hopium and a massive move to the upside. For the first time in three weeks, the price has surpassed $20,000 with the move coming as a surprise to many.

Most recently, inflation fears and macroeconomic uncertainties have dominated the crypto market. Fundamental changes in this regard did not occur yesterday. So what was the reason for yesterday’s upswing in the Bitcoin market?

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What is apparent is that the stock market also rose yesterday, as Microsoft and Google, among others, announced earnings. However, whether this was enough to revive Bitcoin’s volatility is questionable. A better explanation might be the Dollar Index (DXY).

When the DXY began to loose its ground between 8 and 10 a.m. EDT, Bitcoin’s price surged shortly thereafter. The DXY dropped from 112.072 to 110.846 points within those two hours. During the same time, the Bitcoin price showed initial strength, which then extended into a further rally. This phenomenon is not new.

For much of 2022, Bitcoin and the dollar index were strongly correlated in an inverse relationship, i.e., while the DXY was rising, BTC was falling. While the correlation has declined again in recent weeks, yesterday’s move may suggest a resumption of the correlation.

Bitcoin price vs DXY chart
Bitcoin price correlation with the DXY. Source: TradingView

Whether BTC can post more gains could thus depend on the weakness of the DXY. In this regard, the Federal Reserve (FED) is likely to be the focus of investors once again.

The markets will next be eyeing tomorrow’s Gross Domestic Product (GDP) report in the United States to gauge the FED’s future policy. Currently, the U.S. economy is expected to have grown by 2.4% in Q3, which would mean that interest rate hikes are not having too much of a negative impact on the economy at this time.

This, in turn, could reinforce the FED to pursue more higher interest rate hikes. As the central bank recently reiterated, it will keep raising rates until something breaks. A weakening economy could be just the first indicator that the Fed will soon have to abandon its aggressive plan to raise interest rates. The next FOMC meeting on November 02 could provide further insight into this.

More Insights On The Bitcoin Price Rally

Arthur Hayes, co-founder of BitMex and widely respected voice in the crypto space, found another explanation why the DXY tumbled and BTC pumped. As Hayes discussed, the U.S. Treasury is thinking about providing the market with more short-term treasury bills to mitigate a shortage.

Money Market Funds like short term T-bills, but there ain’t enough so they park their money in the Fed’s reverse repo facility. […] Money in RRPs is dead money that cannot be leveraged by the banking system. Money in T-bills is ALIVE and can be leveraged to pamp risky financial assets.

There is $2.2 trillion sitting in RRP, if that number goes down BOOM BABY BOOM! Let’s Fucking Go, Lambo’s for errbody!

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Bitcoin Price Rally Could Gather Pace Above $20.5K: Why Bulls Are In Control

1 year ago

According to Hayes, RRP balances have fallen slightly over the past month. Still, the market expects this buyback action to push RRP balances down even further. However, the buy backs and re-issues of new on-the-run treasury bills have not yet taken place. If this does not happen, there could be a dramatic reversal of yesterday’s trend.

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Jake Simmons
Jake Simmons

Jake Simmons

Jake Simmons, a dedicated crypto journalist, has been passionate about Bitcoin since 2016 when he first learned about it. Through his extensive work with NewsBTC.com and Bitcoinist.com, Jake has become a trusted voice in the crypto community, guiding newcomers and seasoned enthusiasts alike towards a deeper understanding of this dynamic field.

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His mission is simple yet profound: to demystify Bitcoin and cryptocurrencies and make them accessible to everyone.
With a professional career in the Bitcoin and crypto scene that began right after graduating with a degree in Information Systems in 2017, Jake has immersed himself in the industry. Jake joined the NewsBTC Group in late 2022. His educational background provides him with the technical prowess and analytical skills necessary to dissect complex topics and present them in an understandable format. Whether you are a casual reader curious about Bitcoin or an investor seeking to navigate the latest market trends, Jake’s insights offer valuable perspectives that bridge the gap between complex technology and everyday usage.

Jake is not just a reporter on technological trends; he is a firm believer in the transformative potential of Bitcoin over traditional fiat currencies. To him, the current financial system is on the brink of chaos, propelled by unchecked government actions and flawed Keynesian economic policies. Drawing from the principles of the Austrian school of economics, Jake views Bitcoin not merely as a digital asset but as a crucial step towards rectifying a failing monetary system. His libertarian views reinforce his stance that just as the church was separated from the state, so too should money be freed from governmental control.

For Jake, Bitcoin represents more than just an investment; it's a peaceful revolution. He envisions a future where Bitcoin fosters a sustainable and responsible financial framework for generations to come. His advocacy is not about opposition but about evolution, about laying the groundwork for a system that prioritizes transparency and equity over secrecy and inequality.

As a journalist, Jake’s articles are crafted with the precision of a scholar and the passion of a true believer. He provides not only news but also thoughtful analysis that connects the dots between daily developments and larger economic theories. His work is a beacon for those lost in the technical jargon often associated with crypto discussions, illuminating the practical implications and benefits of these technologies.

In summary, Jake Simmons is not just reporting on a revolution; he wants to be part of it, fully committed to enhancing public understanding and adoption of Bitcoin and cryptocurrencies. His work is more than just a collection of articles; it’s a resource, a guide, and a companion for anyone ready to explore the potential of this digital frontier. Whether you are taking your first steps into crypto or are a veteran looking to stay on top of the latest trends, Jake’s insights provide clarity and foresight in an often unpredictable industry. Join him on this journey to reshape the world of finance, one post at a time.

You can engage with his latest takes on Twitter: @realJakeSimmons.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality
Created by industry experts and meticulously reviewed
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How Our News is Made

Strict editorial policy that focuses on accuracy, relevance, and impartiality

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