Bitcoin investors are delighted to see the cryptocurrency reach a new yearly high. It managed to break the $32k area, which was previously a resistance point. This pushed Bitcoin to over $35k.
However, this rally occurred while the US dollar was strengthening against other currencies. The EUR/USD and AUD/USD exchange rates peaked in the first quarter of 2023 and have since been declining.
This has caused Bitcoin to diverge from the rest of the fiat currencies. Even though some might believe Bitcoin is not correlated with macro risks and positioning, it is actually a part of many institutional portfolios. This means it does react to macro.
Unless the US dollar starts to weaken, this recent Bitcoin rally may be reversed. Therefore, caution should be taken.
An image of the Bitcoin chart is provided to illustrate the divergence.
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