Bitcoin Is Outperforming World Currencies As The Dollar Gets Stronger

As world currencies are tanking against the USD (US Dollar), Bitcoin is holding its ground. A strong USD is creating a debasement as the DXY hit an index high of 114.61. The strength of the USD has increased relative to a basket of other currencies (e.g. British Pound, Japanese Yen, etc.). Since the USD is the global reserve currency, a stronger dollar means higher costs for international trading. This affects prices of commodities that are paid for in USD, because of the exchange rate.

In the last 7 days (as reported on Fortune 9/28/22), Bitcoin has grown 6.3%, hitting $20K+ before eventually settling back to a lower level. Other currencies did not do as well. The biggest losses were the British Pound at -5.3% and the Euro at -3.5%. Even the Yuan was not spared, dropping -2.2%.

(Source Fortune)

Safe haven asset gold did just as poorly as the other world currencies. It has fallen by -1.7% against the USD, while Bitcoin has gone up. At this point it is risk off, and many investors are selling off assets in stocks/equities and moving to the USD. Crypto traders are likewise moving their assets from volatile cryptocurrency to stablecoins (e.g. USDT, USDC) that are pegged to the USD.

To further complicate matters, inflation is getting higher. The US has hiked interest rates in order to combat rising inflation, which kills demand and destroys risk on assets. For many investors crypto is being treated like tech stocks, so there have been many sell-offs regarding that. However, there are still those who believe that Bitcoin can be a way to solve that problem.

The idea behind Bitcoin (per maximalist thinking) is that it could or should be a hedge against inflation or economic uncertainties like currency debasement. That means that Bitcoin should be inversely correlated to inflation, but it has been more correlated to the traditional financial markets. Even though the founder Satoshi Nakamoto never stated that it was Bitcoin’s exact purpose to hedge inflation, it has opened that idea since it is outside the current financial system. It is not state controlled or corporation held, which makes it a neutral store of value. It also has a capped limit (21 million coins), so it cannot increase in supply. Despite this, there are large holders (i.e. whales) who can still manipulate prices.

It is interesting to see how this all plays out. It has been observed over the last few years that a stronger dollar equates to a weaker Bitcoin or BTC. At the moment we are seeing that it is not always the case. People who do not want to lose value in their wealth could start putting their money into crypto like BTC. What is slowly happening is that people from those countries where their currency is getting debased are exploring crypto as a way to preserve their wealth. Perhaps it is a short term trend, but if it remains stable within the next few weeks or months, this could be a sign that the value of BTC is being realized.

The Cardano Vasil Upgrade

According to the Cardano project team, their much anticipated Vasil Upgrade hard fork will proceed on September 22, 2022. The upgrade will bring more scalability and also lower transaction costs on the Cardano blockchain. A smart contract platform, like its competitor Ethereum, Cardano represents a third generation blockchain design.

There have been previous delays to the upgrade due to flaws discovered while testing during the summer of 2022. The Cardano project developers have been criticized for moving too slow in meeting targets, but this was to make sure that the software is stable and secure. What many don’t realize is that this is part of the team’s strategy to deliver a product that is tested for quality, making it less prone to failure. Let us not forget that many cryptocurrency projects have ended in failure due to poor development, not to mention tokenomics.

Cardano’s founder Charles Hoskinson mentioned in a YouTube video (from Altcoin Daily):

“We built Cardano to be the financial operating system of the world …. we understood a roadmap to get there … we’ve maintained actually that level of security and quality that people have come to know …”

Charles Hoskinson

In essence, what Hoskinson is saying is that in order to have a working cryptocurrency token, it has to meet rigorous testing and quality assurance. Despite news of errors in the protocol, it was during testing that they occurred. Errors were discovered on the test network, so that means it can be corrected before deploying to production. Development takes plenty of time in order to guarantee an ecosystem that is reliable and safe to use. The team is now ready to deploy the upgrade to the main network, and this should improve the network significantly.

Cardano is at the Goguen phase (smart contracts) of the roadmap to the Basho phase (scaling). This is the release of the Cardano smart contract platform that uses Plutus, a functional programming language that uses Haskell. This also includes the release of Marlowe which is a high level programming language for financial applications that can also be used for building smart contracts. Plutus is more advanced for high-end developers, while Marlowe can be used by users with no previous background in software development.

What will be interesting is what happens in the Cardano ecosystem after the upgrade. For Cardano’s native token ADA, this could mean a big price boost provided there are no complications during and after the upgrade. Traders and investors are keeping an eye on the price of ADA, as the news has been received positively so far (ADA spot market price was at $0.49 as of writing). This has kept ADA among the top 10 in the cryptocurrency market so far (based on CMC 9/4/22).

Cardano sets itself apart from other tokens. It is not a ‘meme’ nor is it considered a purely speculative asset like many coins that have no utility (i.e. ‘shitcoins;). Instead it has its own unique philosophy that is in line with the fundamentals of cryptocurrency, but based on the foundations of sound engineering. It is building a community with its own ecosystem, much like Ethereum. If Cardano can deliver on the many features it hopes to provide users, we can expect it to remain one of the top (if not the top) cryptocurrency in the market.

Disclosure: This is not financial advice. This is for educational purposes only. Do your own research always to verify information.