Newsletter: Dollar Riot

Hello and welcome to this week's edition of DollarRiot, where we bring you the latest and most significant happenings in the world of cryptocurrencies. In this issue, we delve into the intricate relationship between Bitcoin and the U.S. dollar index, the mixed reactions from the SEC on the Ripple crypto ruling, and the public backlash against the United Kingdom's proposed digital pound.

Bitcoin and the Dollar Index: An Inevitable Connection

In a recent article by CoinDesk, it was highlighted that Bitcoin's (BTC) negative correlation with the U.S. dollar index (DXY) has broken in recent weeks¹ . Despite the greenback's continued sell-off, Bitcoin has struggled to gather upside traction. However, this situation may not last long.

The U.S dollar index, which measures the greenback's exchange rate against major global fiat currencies, fell 2.26% last week, hitting its lowest since April last year¹ . Despite this, Bitcoin traded primarily between $30,000 and $32,000, extending the multi-week consolidation. This lack of upward movement in Bitcoin's value, despite the dollar's decline, has puzzled some market observers.

According to Noelle Acheson, author of Crypto is Macro Now newsletter and former head of research at CoinDesk and Genesis, the negative relationship between DXY and BTC is likely to return¹ . This is because gyrations in the dollar index influence global liquidity conditions, which in turn affect valuations in risk assets, including cryptocurrencies¹ .

The dollar is a global reserve currency, playing an outsized role in global trade, international debt, and non-bank borrowing. When the greenback rallies, those with dollar borrowings face higher debt servicing costs and scale-back exposure to risk assets. The weakening of the dollar has the opposite effect¹ .

SEC's Mixed Feelings on Ripple Crypto Ruling

In other news, Securities and Exchange Commission (SEC) Chair Gary Gensler expressed both pleasure and disappointment with a court ruling on Ripple Labs's XRP token² . The court ruled that the XRP token was a security when sold to institutional investors but not to the general public² .

The SEC sued Ripple in 2020, alleging that the sale of XRP was an unregistered securities offering² . Gensler stated that the agency is "pleased" with the part of the decision ruling that the token was a security when sold to institutional investors but "disappointed in other aspects about retail investors"² .

This ruling has significant implications for the crypto industry, as it could set a precedent for how digital assets are classified and regulated. It also highlights the ongoing debate about the nature of cryptocurrencies and whether they should be treated as securities, commodities, or a new asset class altogether² .

UK's Digital Pound Faces Public Backlash

The United Kingdom's proposed digital pound, or "Britcoin," has met with public backlash over privacy concerns and potential consequences for cash³ . The public consultation conducted by His Majesty’s Treasury and the Bank of England drew some 50,000 responses, with widespread concern about privacy and anger over the possible consequences for cash³ .

Critics fear that a digital pound could be used to surveil U.K. citizens and potentially destabilize the U.K. financial system³ . However, proponents argue that a digital pound could enhance financial services for the underserved and those who prefer digital transactions³ .

The debate over the digital pound underscores the broader issues surrounding the adoption of central bank digital currencies (CBDCs). While CBDCs could potentially offer benefits such as increased financial inclusion and more efficient transactions, they also raise concerns about privacy and financial stability³ .

That's all for this week's edition of Crypto Currents. As the world of cryptocurrencies continues to evolve, we'll be here to keep you informed about the latest developments and debates.

Stay Frosty

1. CoinDesk 

2. Yahoo Finance 

3. Cointelegraph