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Why is Bitcoin pegged to the US dollar (relationship between Bitcoin and the US dollar)

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Why is Bitcoin pegged to the US dollar (relationship between Bitcoin and the US dollar)

Why is Bitcoin pegged to the US dollar? Since January 2020, the price of Bitcoin has risen from around $30000 to nearly $60000. However, due to the excessive volatility of BTC, the price of Bitcoin is largely subject to the requirements of the Commodity Futures Trading Commission (CFTC) on the US dollar as the global reserve currency, which leads to various guesses and analyses Why is Bitcoin pegged to the US dollar According to CoinMarketCap data, the market value of Bitcoin as of the time of publication was $4.91 trillion. Compared to other encrypted assets, Bitcoin still has great potential for development Although the price trend of Bitcoin seems similar, it also carries some risks, such as the recent market turmoil that may affect the overall trend of the cryptocurrency market – especially in the US market, where investors are concerned that the economic recovery may push up Bitcoin prices

For example, Bitcoin is currently in a bull market, and the U.S. Dollar Index is one of the main driving factors. Its value is often higher than that of Wet market such as stock markets and precious metals, because they have higher market liquidity and lower interest rates With more and more institutional investments entering this field and many emerging companies adopting encryption technology to meet growing demand, Bitcoin is becoming a mainstream investment choice. So, why does Bitcoin track the US dollar

1. The relationship between Bitcoin and the US dollar

If most central banks in the past year have been issuing CBDCs to support their legal payment methods, then now is a good example.

When the Federal Reserve announces its plan to introduce a stimulus bill, this proposal will be widely discussed and not limited to countries like China or Iran We can see that the main reasons behind these decisions include: 1. Bitcoin itself is a highly speculative asset that can be used to purchase stocks and other commodities 2. The US government does not want to raise funds through printing money US President Trump has repeatedly stated the need to transfer all expenses to the US Treasury, so he is often overlooked, and his policy has always been the same 4. The US Congress must consider how to address this challenge and solve the problem, otherwise they can only take action to prevent the development of digital currencies, making people around the world feel unprofitable and making their lives more free and fair

The relationship between Bitcoin and the US dollar

The relationship between Bitcoin and the US dollar has eased in the past few years, but as more and more traditional financial institutions begin to invest in Cryptocurrency to protect their capital security. The current trend is that as people turn to BTC as a means of storing value and seek to obtain more liquidity, investors will have to find new ways out Since 2018, the US dollar has lost its correlation with other assets such as gold – especially the correlation coefficient between Bitcoin and gold. This indicates that the US dollar is gradually replacing gold as a substitute, and this transformation may continue for some time However, as we can see, Bitcoin remains an important long-term risk factor: it may pose a significant threat to prices and may trigger an increase in global uncertainty; Therefore, although Bitcoin has the potential to solve these problems, they cannot be ignored If gold is a ‘safe haven’ tool, then Bitcoin is more like a speculative asset. According to recent research results, in some cases, gold has potential economic benefits: “For those who are worried about the excessive printing of money by the US government, this is a good opportunity to be bullish.”. On the other hand, the same is true for the “Stablecoin”, because the industry has not yet reached the threshold of maturity. On the contrary, as central banks continue to expand their CBDC issuance scale, improve cross-border remittance speed, and promote the use of Bitcoin, this emerging digital asset may soon become mainstream In fact, Bitcoin has a certain correlation with other major counterfeit currencies and has shown significant growth in the past few months, with XRP being the most popular. In addition, according to Bloomberg, Ripple CEO Brad Garlinghouse stated that Ripple has not launched a single version of its product for its competitors. However, in the long run, many people in the encryption industry believe that the US dollar will dominate at some point in the future The original text is sourced from zycrypto, compiled and organized by Blockchain Knight. The English copyright belongs to the original author. For Chinese reprints, please contact the editor.

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