Why is Bitcoin price outperforming for Australian crypto investors?
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The Bitcoin (CRYPTO: BTC) price is currently at US$19,093 (AU$30,474).
That’s roughly where the world’s top crypto was trading yesterday, having hit highs of US$19,241 and lows of US$18,926 over the past 24 hours, according to data from CoinMarketCap.
This flat performance over the day is not entirely unwelcome. As you probably know, BTC and almost all cryptos have seen a sharp downward trend during 2022.
Why have cryptos been under so much pressure?
Facing strong headwinds from rising inflation and rapidly rising interest rates across much of the globe, the Bitcoin price has fallen 60% so far this year. And that’s down 72% from the all-time highs it hit on November 10 last year. It was then that central banks, including our own RBA, flagged several years of low inflation and low interest rates.
That party ended this year. A year that has seen the RBA raise interest rates from an all-time low of 0.10% to today’s 2.60%, with more rate hikes likely to come in an attempt to curb inflation.
The US central bank has been even more aggressive, raising the benchmark interest rate in the world’s largest economy to today’s 3.25%. And looking ahead, Fed officials are sounding a significantly more hawkish tone than RBA Governor Philp Lowe.
Which brings us back to the Bitcoin price.
More specifically the price in US dollars versus Australian dollars.
Why is Bitcoin price outperforming for Australian crypto investors?
One of the side effects of the aggressive Fed tightening has been a strengthening of the US dollar against most other global currencies. The dollar has also rallied on rising geopolitical uncertainty due to its safe-haven status.
This has caused the Australian dollar to fall from 76 US cents at the beginning of April to just under 63 US cents today.
Which means Australian crypto investors who sell their holdings for US dollars will receive a welcome currency boost.
Commenting on this relative advantage for Bitcoin investors, Head of Trading at Capital.com Australia Brian Gould said:
US dollar strength has meant that Australian dollar traders who entered Bitcoin at current price levels in mid-June have actually made a 10% return in four months, should they choose to redeem the coins and convert their proceeds from US dollars back to Australian dollars .
The Australian traders interested in the dual diversification of cryptocurrency returns that have low correlation with equity and commodity markets, as well as the US dollar diversification inherent in cryptocurrencies during uncertain times for inflation and risk assets, now benefit from simply holding the positions theirs.
On June 18, the Australian dollar was worth 69.3 US cents. Today it trades for 62.7 US cents.
On June 18, the Bitcoin price was at $19,045, roughly where it is trading today.
It’s in US dollars, mind you.
But Australian crypto investors who bought on June 18 and choose to sell today will see a 11.5% increase in Australian dollars.
Watch out for the space between.
