US dollar gains strength as delta variant fears trigger bitcoin, gold market selloff

  • US dollar rises as futures investors confident about greenback’s long-term prospects
  • Delta variant concerns rattle Bitcoin, and gold markets
  • USD becomes the de-facto safe-haven in the current scenario

JAIPUR ( – The US dollar’s been all green for a few days now.

The greenback started Q2 2021 with loss-filled months, but it made up with strong gains towards June end, buoyed by the Fed’s decision to taper its $120 billion bond purchases sooner than previously thought.

Futures bets on bullish prospects of the dollar have grown exponentially. As per the latest Financial Times report, the Commodity Futures Trading Commission (CFTC) observed that:

“The net long position of speculative investors on the dollar index — which tracks the US currency against a basket of rivals — has reached its highest level in more than a year at 11,257 contracts.”

Federal Reserve’s tilt towards tighter policy unleashes dollar bulls, Financial Times, July 19, 2021
Bullish bets on the US dollar went up. Source: CFTC, FT
Bullish bets on the US dollar went up. Source: CFTC, FT

With consistent growth over the last three days, the dollar index (DXY) tapped 93.057 for the first time since April this year. DXY measures the USD’s strength against a basket of major fiat currencies such as the Japanese Yen, the Euro, etc.

Bitcoin Faces Heat

While the US dollar’s story had bulls written all over it, the same was not valid for other assets. Fears related to the widespread surge of the delta variant played spoilsport with Bitcoin and stocks. And not just BTC and equities, gold, traditionally considered an inflation hedge, found itself in the red.

For Bitcoin, it was a 5% drop in spot rates from $31,890 to $30,393. The flagship cryptocurrency’s bearish pressure intensified as investors continued to lose faith amid BTC’s inability to hold firm in a high inflation season. The switch from BTC to USD was pretty evident as market participants looked for more options to access greenback liquidity.

Also Read: Bitcoin week ahead Ep12: Bearish pressure all the way

Technically speaking, BTC has stayed in a suppressed trend, trading within an ascending triangle pattern since the May 19 crash. Finally, the benchmark crypto-asset broke below the triangle support today. Plus, the multi-month price momentum staying below the crucial 50-day moving average (MA) added fuel to the fire.

Strong bearish forces have gripped Bitcoin, Source: BTCUSD on
Strong bearish forces have gripped Bitcoin, Source: BTCUSD on

However, amidst all the bearishness, Bitcoin balances on exchanges have continued to decline. And BTC balances in inner wallets have been ticking up, data from Glassnode suggests.

BTC balance on exchanges declining, Source: Glassnode
BTC balance on exchanges declining, Source: Glassnode
BTC miner balances in an uptrend, Source: Glassnode
BTC miner balances in an uptrend, Source: Glassnode

On top of this Grayscale Investments CEO, Michael Sonnenshein while keeping hopes alive of a Bitcoin ETF launch said,

“A #bitcoin ETF here in the US is really a matter of when, not a matter of if. We’re looking for a couple of different points of maturation in the underlying market. That’s the final stages of what regulators need to approve those types of products.”

Gold Not Spared Either

Surprisingly, gold markets too failed to uphold the ‘ideal hedge against inflation’ faith of investors.

Yellow metal spot rates have been declining since last weekend. After logging a brief rally from $1750/oz lows to $1835/oz, the XAUUSD pair slipped to $1795/oz.

Amid widespread fears of the highly transmissible Delta variant surge, investors apprehensively made the US dollar their de-facto safe haven. So it also seems, the Fed’s dovish to hawkish tone reversal provided the necessary impetus.

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