By now, since yesterday, the price of Bitcoin in USD continues to hover just below $28,000, with very little movement.
What is somewhat surprising is that it is doing so at a time when instead the price of gold and the Dollar Index are both on the move.
However, it is worth mentioning that these are very small movements, but while for gold and the dollar this is the norm, for Bitcoin it is not at all.
The price of gold and USD: the comparison with Bitcoin
Today the price of gold opened slightly down, to $1,930 an ounce, but then rose 1.2% to nearly $1,960.
A 1.2% movement in one morning for the price of gold is no small thing, although the level reached is perfectly in line with the level of last Thursday.
The fact is that from 5 May until now it had almost always been down, so this morning’s 1.2% rebound is definitely peculiar, especially when compared to the stability of BTC.
Shortly after gold‘s descent to $1,930, the Dollar Index had risen as high as 104.5 points, but over the course of the morning it then fell 0.5% to below 104 points.
The current value is lower than that touched during the last two trading sessions, so again this is a relatively significant movement.
Bitcoin’s (USD) price stability
In light of this, the stability of Bitcoin is somewhat surprising, given that historically it has always been an asset with a much more volatile value than gold and the dollar.
The lowest price touched today was over $27,600, while the highest was just over $28,000.
The maximum excursion was 1.5%, thus higher than that of the gold price but by very little.
Usually such movements in gold and the dollar occur together with movements of much more significant amplitude in Bitcoin.
However, it is worth mentioning that in the past few days volatility has been a bit higher, so it is possible that today the price movement of BTC simply stopped a bit.
Lack of capital
According to the research analyst at the publicly traded digital asset investment fintech company Fineqia International (CSE:FNQ), Matteo Greco, the volatility of the past few days was due to fears about the possible default of the US government, due to its failure to reach an agreement with Parliament on a debt increase.
However, that agreement now seems to have been reached, and the volatility has thus momentarily disappeared.
Greco, however, points out that raising the debt ceiling means that the US government would have to issue between $800 billion and $1 trillion over the next six months in government bonds.
This over the medium term could take money away from riskier assets, because some investors may prefer to buy less risky assets such as precisely US government bonds.
The consequence of such a dynamic could be a further slowdown in volumes and liquidity for equity and digital asset markets, with a potential negative impact on prices.
Trading volumes on the exchanges are already quite low, and the issuance of additional bonds could encourage a continuation of their downward trend.
Add to this the risks for a further rise in interest rates, after the not-so-good data just released on inflation, and there is a possibility that USD could strengthen further.
Therefore, the assumption is that capital could shrink in risk-on asset markets, such as stocks and cryptocurrencies.
The strength of the dollar
According to Greco there would be a growing expectation that the dollar could perform even better than risk-on assets in the coming weeks, albeit with macroeconomic conditions changing so fast that it is difficult to make predictions for the next 3-6 months.
Indeed, during 2023 the Dollar Index first fell as low as 100 points in February, and then rose back to almost 106 points during the first days of the outbreak of the banking crisis in the US.
It later returned to 100 in mid-April, but only to return recently above 104 points.
So in the medium term, there is no clear direction, perhaps due in part to the great uncertainty in financial markets lately.
Bitcoin’s price trend right now would seem to be inversely correlated with the dollar, although there have been exceptions, so in the case of further strengthening of the Dollar Index (DXY) we could expect a decline in BTC’s market value.
If, on the other hand, after rising all the way back above 104 DXY points it would now begin to fall, possibly back around the 100 mark, then the price of Bitcoin could benefit.