The Bitcoin (CRYPTO: BTC) price currently stands at US$19,093 (AU$30,474).
That’s about where the world’s top crypto was trading at yesterday, having hit highs of US$19,241 and a low of US$18,926 over the past 24 hours, according to data from CoinMarketCap.
This flat performance over the day isn’t entirely unwelcome. As you likely know, BTC and almost all cryptos have trended sharply lower over the course of 2022.
Why have cryptos been under so much pressure?
Faced with stiff headwinds from soaring inflation and fast-rising interest rates across much of the globe, the Bitcoin price has plummeted 60% year-to-date. And it’s down 72% from the all-time highs it hit on 10 November last year. That’s when central banks, including our own RBA, were flagging years more of low inflation and low rates.
That party came to an end this year. A year that has seen the RBA ratchet up rates from the historic low 0.10% to the current 2.60%, with more rate hikes likely ahead in a bid to tame inflation.
The US Federal Reserve has been even more aggressive, raising the benchmark rate in the world’s largest economy to the current 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 Aussie dollars.
Why is the 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 greenback has also gained amid rising geopolitical uncertainties due to its haven status.
This has seen the Aussie dollar value slip from 76 US cents in early April to just under 63 US cents today.
Which means Aussie crypto investors selling their holdings for US dollars will be receiving a welcome foreign exchange 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 cash in their coins and convert the US dollar proceeds back to Australian dollars.
Those 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, are now benefiting by simply holding onto their positions.
Indeed, on 18 June the Aussie dollar was worth 69.3 US cents. Today it’s trading for 62.7 US cents.
On 18 June, the Bitcoin price stood at US$19,045, right about where it’s trading for today.
That’s in US dollars, mind you.
But Aussie crypto investors who bought on 18 June and opt to sell today, will be up 11.5% in Aussie dollar terms.
Mind the gap.
