The prospect of the fast-spreading COVID-19 outbreak led to lockdowns across developed and emerging economies- In turn, global stocks crashed in tandem, and Bitcoin lost half its value in solely two days.
On the other hand, the USD index, or DXY, that represents the greenback’s strength against a basket of top foreign currencies, has now climbed by 8.78% to 102.992, its highest level since January 2017.
The huge inverse correlation revealed that investors dumped their stocks and Bitcoin holdings and sought safety in what they thought was a far better haven: the greenback.
More than a year later, Bitcoin and stock markets again wrestle with an identical bearish sentiment, this point led by a renewed demand for the USD following the Federal Reserve’s hawkish tone.
Namely, the United States central bank earlier on Wednesday added that it’ll start hiking its benchmark interest rates by the end of 2023, a year prior it planned.
Lower interest rates helped to tug Bitcoin and therefore the United States stock exchange out of their bearish slumber. The benchmark crypto jumped from $3,858 earlier in March 2020 to almost $65k in April 2021 as the Fed pushed lending rates to the 0%-0.25% range.
Meanwhile, the S&P 500 index rose over 95% to 4,257.16 from its mid-March 2020 peak. Dow Jones and Nasdaq rallied similarly, as shown within the chart below.
And this is often what happened after the Federal Reserve’s rate-hike announcement on Wednesday…
Meanwhile, the USD index jumped to its two-month high, hinting at a renewed appetite for the greenback in global markets.
Popular on-chain analyst Willy Woo outlined earlier on Friday that a stock exchange crash including a rising dollar could increase Bitcoin’s bearish outlook.
“Some downside risk if stonks tank, tons of rallying within the DXY [USD strength] which is typical of cash moving to safety,” he explained.
Michael Burry, the head of Scion Asset Management, also sounded the alarm on an imminent Bitcoin and stock exchange crash, adding that when cryptocurrency markets fall from trillions, or when meme stocks fall from billions, the Main Street losses will approach the size of nations.
“The issue with crypto, as in most things, is that the leverage,” he tweeted. “If you don’t know much leverage is in crypto, you do not know anything about crypto.”
However, Burry deleted his tweets later.