The US dollar rally is likely to continue.  And it’s bad for encryption

The US dollar rally is likely to continue. And it’s bad for encryption

The continued strength of the US dollar could put more downward pressure on cryptocurrency prices that have already suffered along with other risk assets as bitcoin lost more than half its value year-to-date.

In recent months, the dollar DXY,
-0.09%
has amassed historic highs against its major rivals.

The British pound GBPUSD,
-0.08%
on Friday it fell to its lowest level against the US dollar since 1985, trading as low as $1.14. In July, the euro EURUSD,
+0.02%
it fell below parity against the dollar for the first time in nearly 20 years, before rebounding to parity. Earlier this month, the Japanese yen USDJPY,
-0.39%
fell to its lowest level against the US dollar since 1998, while the greenback rose above 7 yuan CNYUSD,

to the dollar for the first time in more than two years.

The dollar benefited from the Federal Reserve raising interest rates at a faster pace than other major countries, analysts said.

“This gives international investors a lot of confidence that the US is going to be the place to be because they’re not going to let inflation get out of hand,” said Mike Vogelzang, chief investment officer at Captrust.

Meanwhile, the US is “probably not going to have as deep a recession as Germany or England or the UK,” Vogelzang noted.

The dollar’s outperformance is detrimental to cryptocurrencies, with the majority of bitcoin trading taking place against the USD or the USDTUSD stablecoins backed by USD.
-0.01%

USDCUSD,
.
Biggest Cryptocurrency BTCUSD,
-0.24%
down 17.6% last week and more than 57% year-to-date, according to CoinDesk data.

Worse for crypto, the dollar’s rally is likely to continue, noted Martha Reyes, head of research at crypto exchange Bequant. “The only way the dollar can go is still up,” Reyes said, citing the energy crisis in Europe, Japan’s negative interest rate policy and China’s zero-Covid policy.

Reading: Why an epic US dollar rally could be a ‘wrecking ball’ for financial markets

That said, it appears the dollar’s strength is increasing, according to Todd Morgan, president and partner at Bel Air Investment Advisors.

“I think the dollar surprise will come and next year it will start to fall once again to a more normalized level,” Morgan said in an interview. “But it’s also very difficult to call it a dollar move since it’s interest rates.”

Hear Mike Novogratz at the Best New Ideas in Money festival on September 21st and 22nd in New York. Galaxy Digital’s CEO has ideas for navigating the crypto winter.

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