Bitcoin surpassed the $ 20,000 level for the first time in history.
The flagship cryptocurrency saw a surprising upward rally in its pre-IPO New York trading session on Wednesday, hitting an all-time high of $ 20,822 before falling slightly. Analysts said it saw the upward trend from the arrival of institutional capital in the crypto space as mainstream investors sought alternative hedging assets against fears of long-term inflation.
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The cryptocurrency was at risk after the Federal Reserve announced a series of accommodative fiscal policies to protect the US economy from the effects of the COVID-19 pandemic. Their actions included a near-zero lending rate tool, as well as a commitment to buy governments and corporate debt indefinitely.
Bitcoin keeps its intraday gains close to $ 20.7,000. Source: BTCUSD on TradingView.com
Bitcoin is maintaining its intraday gains near $20.7K. Source: BTCUSD on TradingView.com
While the framework helped contain the damage caused by the pandemic, it left the bond market oversold and pushed its short-term yields into negative territory. In simple terms, investors who bought short-term Treasuries risked losing some of their investments by the time the bond matures.
This marked the rise of Bitcoin as an alternative protection asset, just like gold and silver.
Between March 2020 and today, the cryptocurrency rose 439 percent (data from Coinbase). Meanwhile, it received further positive support from the U.S. government’s $ 2.3 trillion COVID-19 stimulus package, which pushed the U.S. dollar index down.
The US dollar index is down 12.48% from its mid-March high. Source: DXY on TradingView.com
US Dollar Index has fallen by 12.48% from its mid-March high. Source: DXY on TradingView.com
Factors at play this week
Both the Fed and government stimulus factors play a role on Wednesday.
The central bank will split its futures forecast at 1430 EST, with experts suggesting it would continue to buy government bonds at the same pace and keep interest rates near zero. On the other hand, the US Congress is also about to conclude the second economic stimulus package to support a troubled job market amid the increasing cases of coronavirus.
As a result, the US dollar index fell to its two-year low on Wednesday.
“Gold, dollars, often have big moves at this time,” said Lyn Alden, founder of Lyn Alden Investment Strategy. “If the Fed is less reluctant than expected, Bitcoin could get a correction. If it holds on to most of this rally after that meeting, that’s bullish AF. ”