Following the Bitcoin price’s extreme loss of volatility over the past few weeks, yesterday’s rally feels like new hopium and a massive move to the upside. For the first time in three weeks, the price has surpassed $20,000 with the move coming as a surprise to many.
Most recently, inflation fears and macroeconomic uncertainties have dominated the crypto market. Fundamental changes in this regard did not occur yesterday. So what was the reason for yesterday’s upswing in the Bitcoin market?
What is apparent is that the stock market also rose yesterday, as Microsoft and Google, among others, announced earnings. However, whether this was enough to revive Bitcoin’s volatility is questionable. A better explanation might be the Dollar Index (DXY).
For much of 2022, Bitcoin and the dollar index were strongly correlated in an inverse relationship, i.e., while the DXY was rising, BTC was falling. While the correlation has declined again in recent weeks, yesterday’s move may suggest a resumption of the correlation.
More Insights On The Bitcoin Price Rally
Arthur Hayes, co-founder of BitMex and widely respected voice in the crypto space, found another explanation why the DXY tumbled and BTC pumped. As Hayes , the U.S. Treasury is thinking about providing the market with more short-term treasury bills to mitigate a shortage.According to Hayes, RRP balances have fallen slightly over the past month. Still, the market expects this buyback action to push RRP balances down even further. However, the buy backs and re-issues of new on-the-run treasury bills have not yet taken place. If this does not happen, there could be a dramatic reversal of yesterday’s trend.Money Market Funds like short term T-bills, but there ain’t enough so they park their money in the Fed’s reverse repo facility. […] Money in RRPs is dead money that cannot be leveraged by the banking system. Money in T-bills is ALIVE and can be leveraged to pamp risky financial assets.
There is $2.2 trillion sitting in RRP, if that number goes down BOOM BABY BOOM! Let’s Fucking Go, Lambo’s for errbody!
