x
The bitcoin market continues to display weakness; xDai total value locked shows interest in Ethereum scaling solutions.
Bitcoin’s price had remained in a narrow range since Monday, as the world’s oldest cryptocurrency stuck within $10,400 territory Wednesday before falling to as low as $10,250 just prior to press time.
Read More: Bitcoin Market Weakening After Sell-Off, On-Chain Data Suggests
“September has been a unique month in the crypto markets,” said Elie Le Rest, a partner at quant trading firm ExoAlpha. “Crypto has become way more thinly traded,” he added.
Indeed, after the month opened with a rarely-seen $1 billion day on major exchanges September 3, bitcoin volume has weakened. It was at $202 million Wednesday as of press time.
BTC spot volume on major exchanges the past month.
(Skew)
As the bitcoin market remains tepid, the U.S. Dollar Index, a measure of the greenback versus a basket of other fiat currencies, is bouncing back from 2020 lows, in the green 0.40% as of press time.
The US dollar index in 2020.
(TradingView)
Cryptocurrency traders like to keep an eye on the strength of the dollar, but many have differing views on what the index’s rise might mean.
“I see the Dollar index going up as a correction after its performance during the pandemic,” said Alessandro Andreotti, an over-the-counter crypto trader in Italy. “On the mid- to long-term, I’m personally still bullish on bitcoin as well as on precious metals like gold.”
Henrik Kugelberg, another European over-the-counter trader based in Sweden, said he expects the dollar will become deflationary, where the prices of goods and services drop.
“I now feel convinced that what we see and will see is deflation and not inflation,” he said. “If this is correct, people will sell bonds and buy safer stuff, like high-end real estate, gold and bitcoin.”
Whatever the trader narrative is on the dollar, this much is true: Based on Federal Reserve data, there are more dollars floating around the global economy than ever before.
The amount of M1 money stock, which includes USD, in circulation since 1975.
(St. Louis Fed)
As for bitcoin’s tepid performance the past few days, a loss of momentum for decentralized finance, or DeFi, this week may partially be to blame for a lackluster crypto market. “The recent crash in DeFi may explain the current market silence for the past two days as traders and lenders are figuring out next steps to allocate capital and execute trading strategies,” said ExoAlpha’s Le Rest.
The second largest cryptocurrency by market capitalization, ether (ETH), was down Wednesday trading around $327 and slipping 4.7% in 24 hours as of 20:00 UTC (4:00 p.m. EDT).
