Dwyfor Evans, the head of macro strategy at Hong Kong-based State Street Global Markets, noted that expectations of the Federal Reserve’s rate hikes in the US prompted investors to de-risk their portfolios. That happened despite reassurances from the central bank’s chairman Jerome Powell that they would keep rates near zero until 2023.
BOND SELL-OFF RIPPLES INTO SHORTER-DATED NOTES
The US dollar index, a barometer to track the greenback’s value against top foreign currencies, opened 0.24 percent higher from its previous close on Wednesday. Its dramatic climb served as one of the major catalysts behind Bitcoin’s overnight plunge. The cryptocurrency’s loyal investor base treats it as a hedge against dollar depreciation.
Lower yields served as the main reason behind its supersonic rally throughout 2020 and this year. Mainstream investors treat it as a hedge against global uncertainty. Therefore, it cannot always maintain its correlation with conventional assets, especially as the economic outlook improves from investors’ point-of-view.
JOBS DATA VS. BITCOIN
Labor Department data released Thursday showed the number of unemployed claims fell dramatically last week. That raised possibilities that the Fed would end its open-ended bond-buying program and raise benchmark interest rates much sooner than expected, given Mr. Powell’s earlier statements on the jobs market.
Bitcoin has emerged as an asset that offers hedging capabilities against fiat-linked inflation. Meanwhile, its profits in the previous year has paved way for many investors to treat it as a “digital gold.” Analysts believe the cryptocurrency is off to hitting $100,000 by the end of this year.