Bitcoin Could Benefit from Weakening Dollar
Bitcoin (BTC) may experience a positive trend in the coming weeks and beyond as macroeconomic factors come into play. According to popular trader Crypto Ed, the decline in U.S. dollar strength could boost Bitcoin. Historically, Bitcoin and the dollar have exhibited an inverse correlation, and changes in U.S. macro policy are expected to continue this trend. With declining inflation, the Federal Reserve may adjust interest rates, leading to increased liquidity and benefiting risk assets like Bitcoin. The U.S. dollar index (DXY) has already dropped over 2% this week, reaching its lowest levels since mid-August.
Fed Balance Sheet Expands
Economist Lyn Alden has noted that while there are signs of increased liquidity, conditions are not yet ideal for a broad risk-asset revival. The Fed’s balance sheet has started to grow for the first time since August, indicating a potential increase in liquidity. However, markets have also priced in expectations of lower interest rates in 2024. Despite these developments, Alden believes there is still room for improvement before a significant risk-asset renaissance occurs.
Hot Take: Bitcoin Could Reach New All-Time Highs
The weakening U.S. dollar and increasing liquidity could pave the way for Bitcoin to reach new all-time highs. As the dollar continues to decline, Bitcoin’s value may rise further. With changing macroeconomic policies and declining inflation, the Federal Reserve’s actions are expected to benefit Bitcoin and other risk assets. While conditions are not yet perfect for a broad risk-asset revival, the potential for increased liquidity suggests positive prospects for Bitcoin’s future performance.
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