Bitcoin is drawing bids amid a sell-off in the U.S dollar, with new signs emerging that the largest cryptocurrency is maturing as a global asset class.
- At the time of writing, bitcoin is trading near $11,900 – up 2% on the day. Prices reached a high of $11,964 early Tuesday, according to CoinDesk's Bitcoin Price Index.
- The dollar index, which gauges the greenback's value against major currencies, is currently trading 0.4% lower at 91.75, the lowest level since April 2018. The greenback is down more than 10% from highs seen in Mach.
- "From a macro level, the U.S. dollar has continued to fall since [the Federal Reserve's Jackson Hole meeting], creating a further buying pressure on bitcoin and broader safe-haven commodities such as gold," Matthew Dibb, co-founder of Stack, a provider of cryptocurrency trackers and index funds, told CoinDesk in a WhatsApp chat.
- Investors are selling dollars, possibly on bets that interest rates in the U.S. would remain low for a long time.
- The Federal Reserve now has the room to hold rates low for a prolonged period, having signaled tolerance for high inflation last week.
- U.S. inflation expectations have continued to strengthen since Fed Chair Jerome Powell's inflation speech at Jackson Hole last week.
- The 10-year breakeven inflation rate, or the bond market's expectation of price pressures over the next ten years, rose to 1.8% on Monday, the highest level since Jan. 2, according to the Federal Reserve Bank of St. Louis.
- Long-term inflation expectations have more than tripled in the past 5.5 months to 1.8%.
- "Bitcoin is showing significant strength today on the back of recent gains in ethereum and the broader alternative cryptocurrencies," Dibb said, citing increased buying in the $12,000 call option expiring in September as evidence of the market's short-term bullish mood.
- The Singapore-based QCP Capital noted in its Telegram channel that "there was a flurry of put buying on Monday and more of such hedging flows may be seen in the next weeks if bitcon is held below $12,500."
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