In a sign of continued maturity as an active macro, bitcoin now appears to lead the price action in the foreign exchange (FX) markets.
“The dollar was stable again on Monday, after a record-breaking rise in bitcoin thwarted the US currency’s attempt to recover. [U.S. nonfarm] losses inspired by the payroll in the previous session, ”said a Reuters article published earlier this week.
The article claims that the Tesla-led bitcoin (BTC) recovery helped EUR / USD (euro-dollar exchange rate) to extend Friday’s gains in the wake of the gloomy confidence data of eurozone investors.
A closer look at the price action of the two markets shows that EUR / USD, the most liquid currency pair globally, followed bitcoin’s rise following Tesla news.
EUR / USD exited a descending channel (top left) at 14:00 UTC on Monday, signaling a continuation of Friday’s increase from 1.1990 to 1.2040, which was fueled by the discouraging sheet data US non-agricultural payment (labor market).
Notably, the currency pair’s breakout came at least an hour after Tesla’s news propelled bitcoin to new highs above $ 42,000. The American electric car maker released its $ 1.5 billion bitcoin investments, validating the cryptocurrency’s appeal as a reserve asset.
It seems that foreign exchange traders have sold dollars, raising the EUR / USD higher, while the dollar has suffered a blow against bitcoin, a perception of inflation hedge / digital gold. It is important to note that macro factors, such as the slow delivery of the vaccine in the euro zone and the relatively lukewarm economic recovery, favored a fall in the EUR / USD.
Both bitcoin and EUR / USD have remained largely bid since. The cryptocurrency set a new peak price of $ 48,925 on Friday, while EUR / USD is now trading above 1,200.
While it may be too early to call bitcoin an important indicator for foreign exchange markets, analysts are confident that cryptocurrency is moving in that direction.
“Although I certainly think this is our way, bitcoin still has a little more maturity before we get there,” Joel Kruger, currency strategist at LMAX Digital, told CoinDesk in a Telegram chat.
The cryptographic community considers bitcoin a better store of value and medium of exchange than the US dollar and fiat currencies in general. That’s because the pace of expansion of bitcoin’s supply is cut in half every four years, which contrasts sharply with the expansionary (inflationary) monetary policy implemented by the U.S. Federal Reserve and other major central banks.