The Federal Reserve in the US has taken all the actions that would normally cause a drop in USD exchange rates. However, as the world is in the early phases of an economic shutdown due to coronavirus, the demand for US dollars is still intact.
Since, last week the US financial regulators increased the supply of US by more than $2.2 trillion dollars along with decreasing the interest rates to 0%. This is perfect recipe of a collapse of USD due to heightened supply.
The massive sell-off in the traditional stock and commodities markets to increase cash positions, along the global demand for US dollar liquidity seems to be balancing the supply shocks that US keeps delivering.
However, the FX markets are now absorbing the shocks as the demand price creeps back up near the 50-Day EMA as the demand of US dollar is increasing due to the virus scare.
The crisis has brought Bitcoin at an important cross-road in it’s history. The general sentiments are bearish with negative funding rate and basis points across BitMEX and Okex. The price continues to be in a range with $5,500-$5,650 as levels of resistance.
As the situation of the virus is getting is worse, the demand for liquidity in the dollar is rising. This is necessary in the short-term to avoid depression due to lack of liquidity in the markets.
However, in the long-term, the money printed out of thin air will eventually slow down the economy further. Gabor Gurbacs, the CEO and digital asset strategist at VanEck tweeted,
The trillions printed by central banks out of thin air reminds me how #Bitcoin is the only remaining free-market world-currency. It’s time for plan ₿!
The short-term bearish along long-term bullish views of Bitcoin is currently holding the uncertainty. At the same time, crypto markets might be gearing up for a lot of volatility in the near term as well.
Have to consider the bearish news for the USD too.
Weak $ = Bullish $BTC
Currently not in a position. pic.twitter.com/tT5PwXfLza
— Murfski 墨菲 (@Murfski_) March 17, 2020
How do you think global FIAT markets and crypto markets will react to the crisis? Please share your views with us.