Global Risk Sentiment Improves: US Dollar Dips, Bitcoin jumps to new high above $66,000

Hello as always, and welcome to today’s edition of Overbit Weekly Round Up.

We kick off today’s edition by looking at some of the global investing landscape, more specifically global risk sentiment and its relation to the U.S. dollar.

Last week, the dollar rose to a one-year high versus a basket of other currencies as market players increased their wagers that the Federal Reserve would raise interest rates sooner than expected to alleviate growing inflationary pressures.

Now, on Wednesday, 20 October, the dollar fell as risk sentiment improved and investors focused on rising commodity prices and when global central banks are expected to start raising interest rates to combat stubbornly high inflation. The Fed is expected to raise rates twice before the end of 2022, according to market participants.

The dollar’s recent drop might be due to a mix of markets closing long-dollar positions and “a benign risk environment, as a solid U.S. earnings season has continued to outweigh inflation/monetary tightening fears,” according to ING FX analysts in a client note.

The Australian dollar, which is used as a liquid proxy for risk appetite, rose 0.27 per cent to $0.7496 on the day after hitting its highest level since July overnight. Similarly, The New Zealand currency climbed 0.41 per cent to $0.7154, its highest level since June. On the flip side, the dollar rose to a four-year high of 114.67 vs the yen overnight, signalling lower demand for safe-haven assets.

All in all, it seems clear that the global capital markets are certainly increasing their risk tolerance at this time of year, which has profound implications for the cryptocurrency markets and brings us to our final story of the day.

Taking a brief look at the cryptocurrency markets, it is evident to anyone that on Wednesday, Bitcoin eked out a brand new all-time high, right off the back of a successful ETF launch in the United States.

According to Coin Metrics, the world’s largest cryptocurrency rose 3.9 per cent to $66,398.25 at 4 p.m. E.T. The coin hit a new intraday high of $66,900 on Wednesday, breaking the previous high of $64,899 established in mid-April.

“The key here is whether we are able to establish support above $65,000,” said Jesse Proudman, CEO of crypto robo-advisor Makara. “If we can, the classic Q4 crypto rallies we’ve seen in most years could take Bitcoin towards some of the loftier price predictions we’ve seen over the past several months.”

As crypto continues to climb, more and more of its famous advocates come out of the woodwork to explain their investment, such as billionaire investor Paul Tudor Jones, who called crypto his preferred inflation hedge over gold.

“Crypto would be a great hedge,” Jones told CNBC’s `Squawk Box`. “There’s a plan in place for crypto and clearly it’s winning the race against gold at the moment … I would think that would also be a very good inflation hedge,” he said.

Bitcoin wasn’t the only crypto asset moving upward, though, as it sometimes does. Ethereum also climbed 7.4 per cent to reclaim the $4,000 mark, reaching as high as $4,104.61 – just a few hundred short of its all-time intraday high of $4,380 set in May.

Risk sentiment improving and Bitcoin creeping into all-time highs; this type of environment is not too surprising as we continue through what’s usually a bullish time of year, especially for crypto markets.

Thanks as always for reading! Don’t forget to check back at Overbit for your latest news, stories and trends in the global markets.

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