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Why Does Bitcoin Follow the US Stock Market (Why is Bitcoin Priced in USD)?

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Why does Bitcoin follow the US stock market? We can understand this from sever

Why Does Bitcoin Follow the US Stock Market (Why is Bitcoin Priced in USD)?

Why does Bitcoin follow the US stock market? We can understand this from several aspects. Firstly, cryptocurrencies play an important role in the traditional financial market. With the maturity of digital assets and the mainstream trend of more and more users accepting blockchain and digital assets as an investment tool, it has become the focus of global investors’ attention. This is not only a big deal for the crypto field, but also a major event. Secondly, with the inauguration of US President Joe Biden and the signing of a $1.9 trillion economic stimulus bill, the country’s economy is expected to experience a “significant” increase. Finally, it is widely believed that due to high inflation rates, government restrictions on printing money, and other factors, the US dollar is depreciating, which is a cause for concern. However, for most people, this situation will not change. Nevertheless, this shift is not uncommon, especially in recent days. If we were to say whether Bitcoin will synchronize with anything else like stocks, let’s take a look at the correlation between Bitcoin and the stock market. There are three main reasons why Bitcoin can track the US stock market: 1. Bitcoin has low price volatility. 2. Investors need more funds for purchasing as they seek alternative assets with faster price discovery. 3. Institutional investors’ interest is growing. Additionally, some large tech companies have emerged on Wall Street, aiming to increase the value of the cryptocurrencies they hold and attract new users in various ways. (Image source: Bitcoinist)

The correlation between Bitcoin and stocks is an important factor because when it comes to Bitcoin, its correlation and risks can be high, so there are usually more traders involved. (Data source: CoinMarketCap). The relationship between Bitcoin and stocks, as many industry analysts have pointed out, is that “Bitcoin is leading the world.” However, there is another question to consider: Does the relationship between Bitcoin and stocks actually not directly affect the price of BTC? The answer is obviously not. Instead, it is based on two fundamental factors: 1. Strong market liquidity. 2. Changes in the macroeconomic environment. 3. The US Department of Treasury will strengthen anti-money laundering regulations. 4. Central banks around the world will continue to issue their own CBDC and use them for payment purposes.

Why is Bitcoin Priced in USD?

Editor’s note: This article is from Zhongben Xiaocong (ID: xcongapp), author: Tan Shu, published with permission from Odaily Star Daily. In the cryptocurrency market, Bitcoin’s price volatility has always existed, but its value has no direct link with fiat currencies. For example, the trading volume of digital assets priced in USD is much higher than any other token, indicating that it still has a certain speculative and liquidity risk. On the other hand, due to the consideration of regulatory agencies in the United States investigating and evaluating some non-compliant investments, many companies have transferred some funds into the Bitcoin investment field. (Image source: Internet) So, the question arises: why is the current price of Bitcoin priced in gold? Why is it priced in USD now? (Translation): Firstly, from a macro perspective, the global economy is in a period of low growth, and the role of the US dollar as a major reserve asset is increasingly prominent. This is because governments of various countries are printing their own national currencies to cope with the impact of the epidemic. However, based on historical experience, the US dollar has three main functions: 1. Making the traditional financial system more transparent. 2. Reducing the impact of exchange rate fluctuations. 3. The US Department of Treasury will strengthen anti-money laundering regulations. 4. Central banks around the world will continue to issue their own CBDC and use them for payment purposes.

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