Yerevan (CoinChapter.com) — Bitcoin prices slipped Monday after Donald Trump accused it of hurting the US dollar’s value.
Scam
The former US president told Fox Business that he sees Bitcoin as a scam, adding that he wanted the dollar to become the global currency. His comments appeared after Nayib Bukele, the president of El Salvador, announced that he would make Bitcoin a legal tender.
Bitcoin prices were stable following Bukele’s announcement, trading in a no man’s land without any clear near-term bias. However, after Trump’s comments, the cryptocurrency slipped below $32,500 ahead of the London session Monday, pointing at its intention to revisit its May 19 support of $30,000.
The latest decline came as an extension of Bitcoin’s ongoing downside correction. The cryptocurrency fell more than 40 percent after topping out near $65,000 in mid-May. Before that, it had rallied by more than 1,700 percent that started in the wake of the coronavirus pandemic in March 2020.
Meanwhile, on-chain metrics pointed at short-term HODLERS selling their Bitcoin stash under impression that the cryptocurrency has entered a new bearish cycle. Glassnode’s ‘Bitcoin: Total Supply Held by Short-term Holders’ indicator showed a decline in their BTC wallet reserves.
On the other hand, the BTC supply held by long-term holders spiked, showing that they were buying the dip and hence kept the market from pursuing aggressive bearish trends. Anthony Pompliano, the partner at Pomp Investments, said in a note to clients:
“Bitcoin has an uphill battle because there is [a] fair portion of supply bought overhead in the consolidation between $50K-60K. Some of these buyers will be looking to minimize their losses realized by selling what they believe is a complacency bounce on the way up. It will probably take some more time for these coins to be accumulated, but we’re on the right track.”
Nevertheless…
…bulls remained convinced that the prices would recover. Market analyst Vince Prince cited the rising US debt as one of the core reasons investors seek insurance by purchasing inflation-protected assets, including Bitcoin. He explained:
“US national debt increased significantly over the last year’s crisis which is one of the factors for potential increased inflation. In such times it is necessary to look for inflation-protection in assets like Bitcoin.”
The US national debt rose to $28.132 trillion in Q1 2021 from $23.223 trillion in Q1 2020 as the US government launched three coronavirus stimulus packages worth over $6.4 trillion for American citizens and the Federal Reserve slashed interest rates to near zero and launched an infinite bond-buying program worth $120 billion a month.
As a result, the US dollar index, a metric that compares the greenback’s strength against a basket of top foreign currencies, fell about 13 percent in 2020. That provided investors more cues to step away from traditional safe-havens and seek hedge in riskier hedges like stocks and Bitcoin.
Bitcoin to $20K
But the trend has subsided on worries that the Fed might taper its expansionary programs now that inflation is running higher above its 2 percent target (4.2 percent in April; expectations of 4.6 percent in May). That expects to increase the dollar’s appeal short-term, thereby sapping investors’ appetite for Bitcoin.
“Right now, though, if there is a Bitcoin cycle – and I believe there clearly is – we are on the way to below $20,000, and when we get there, it will be time to start planning a re-entry.”
— noted Clem Chambers, the CEO of financial research website ADVFN.com.
