The financial world is feeling the negative cash flows of an unsteady Dollar right now. However, these fears in the market are from where the actual money is. The investment market is, overall, looking great.
Our question is “where is all of the money, and where is it all going?”
The pressures now seen on Bitcoin’s price is more expected than investors realize.
Here’s a better look at why.
The Dollar Reliant Bitcoin …
Bitcoin is now as reliant on the American Dollar as Tether, USDCoin and DAI are.
Trending news in this emerging week for crypto puts our focus on the falling price of Bitcoin, and this is right when the Dollar also takes a big hit in the market.
Part of the craze that’s trending is an amazing outflow of $78 million from Bitcoin ETFs. Now, before getting excited or anxious about it, we’ve to look at what institutions do and how.
Take it into account how financial firms actually manage their clients’ money.
As economic indicators reach peaks and troughs, the top financial agencies will move money from one asset only to put it into another. You see, the big outflow in Bitcoin ETFs doesn’t reflect money leaving the investment market.
That money gets allocated to other assets instead.
The question now is “where did the money go?”
In the past two months, we found “tokenized treasuries” also earning a hefty inflow of new money. The deposits, according to Yahoo Finance, amounted to just over $500 million.
Among these were BlackRock’s BUIDL token that’s still gaining traction today.
The Negative Cash Flows of the U.S. Dollar
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The market has to tell us the ultimate truth, but there’s prematurity in responding with haste now.
Though now surging back into an inflation zone, the Dollar took a beating last week. That drought is likely to pick back up as the Fed remains steady on its agenda for future rate cuts.
The Bank of Canada dropped their rates .25% just yesterday, September 4, 2024. When multiple banks take these identical actions, they all tend to follow suit.
Though bank prices tend to be prewritten in the market, analysts foresee more drops soon. This is because both the Fed’s meeting and the date of their actual cut haven’t come yet.
How Does This Relate to Crypto?
The Dollar crunch is likely what led the leading investment banks to reallocate money into investments like gold and treasuries. As long as the Dollar holds the suspense of a drop, investment institutions will look to hedge their positions, meaning they’ll hold less crypto.
Even the major Swiss investment bank, UBS, is declaring a dollar crisis ready to unfold.
In its own words:
“The weakening of the U.S. dollar, in response to softer monetary policy expectations by the Fed, aligns with our view that the U.S. economy is headed for a soft landing” — UBS reporting
Yes, rate cuts are still on the agenda.
This means that getting out of a certain position now can actually save investors some money. As Bitcoin faces social hurdles, a price fall can be avoided if you’re no longer holding any positions.
This allows you to buy Bitcoin back cheaper.
So if prices do actually plummet, investors might buy more BTC once it hits a price floor.
Remember, also, to only invest what you are capable of comfortably losing.
This does not constitute investment advice.
