Bitcoin Drops Below $38,000 as Investors Move Record $756 Billion to Federal Coffers

The price of Bitcoin responded to the overnight availability of interests in federal reserves. Investors pumped over $756 billion because the Central Bank implemented a reverse repurchase facility on the 17th of July. The gross realization is roughly $172 billion higher than last week’s deposits.

The heavy input came from 70 investors yesterday. Before Wednesday, the reverse repurchase facility offered no interest rates for funds collected from money markets and banks supported by the government. The Federal Reserve’s signal to offer interests as effective from 2023 instead of 2024 saw the rate bank deposits move from 0.10 percent to 0.15 percent. 

Excessive dollar liquidity in the US economy encouraged investment in short-term governmental securities. However, with securities being in high demand, the yields soon appeared negative. These developments made investors take to cryptocurrencies from March 2020 as the industry was perceived to offer more in returns than traditional reserves.

However, interest in crypto is headbutted by the reservations that the authorities hold about digital assets. Coupled with the current volatility in the crypto market, mainstream investors are turning to less-risk facilitates aside from Bitcoin or gold. The result is a heavy inflow of cash to the now interest-paying reverse repo facility.

Bitcoin Ducks as Dollar Soars

The United States Dollar hit its biggest rise since mid-April this Friday to 92.70 against other top-tier currencies. The development sparked a negative reaction to Bitcoin’s value. 

CEO of Global Macro Investor Raoul Pal said that the spike of the dollar has minimized the inflation narrative. However, he said the tapering of the federal government won’t affect store-of-value assets like Bitcoin and gold. He further stated that the resultant scenario would be the purchase of sovereign debt by the government that would ultimately push bond yields lower. 

Pal added that in the last half of the is year, the recovery of the dollar would stabilize. He predicted the capital to flow back to assets like Bitcoin and gold. 

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