Bitcoin rose higher during Wednesday’s trading yesterday as demand for alternative safe havens remained strong against a below-average US dollar. The benchmark cryptocurrency rose 5 percent to close at $ 11,756.75 (data from Coinbase). The price gains followed a record increase in the gold market, with the precious metal continuing to grow after breaking the $ 2,000 mark. Overall, this rally of scarce assets made investors’ inflation fears clear.
Gigantic Stock market rally
Pictet Asset Management chief strategist Luca Paolini said in a statement to FT that investors should exercise caution after the gigantic stock market rally in March. She believes Wall Street valuations are overused as “downside risks to earnings remain”. She also comments that the fear of a massive correction has sent investors looking for security into the bond market, which is itself more expensive and has the worst return in two decades.
Further declines for the US dollar
Meanwhile, the recent decline in the US dollar suggests that investors don’t want to park their capital in the greenback. Part of the reason is the Fed’s overt easing policy with a liberal inflation target of 2 percent – and the trillion dollar stimulus packages by the US Congress that are pushing the dollar into oversupply. This has made gold more attractive as the next best diversification facility. In the meantime, Bitcoin is only benefiting from its decades of history as a safe haven. The technical levels on the US dollar index chart also show that the basket is heading for another weaker trend in the coming weeks.