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the Bitcoin (CRYPTO: BTC) the price is currently US$19,093 (AU$30,474).
That is the level at which the world’s leading cryptocurrency was trading yesterday, having hit highs of $19,241 and lows of $18,926 in the last 24 hours, according to data from CoinMarketCap.
This flat daytime performance isn’t entirely off-putting. As you probably know, BTC and almost all cryptocurrencies have been trending down over the course of 2022.
Why have cryptocurrencies been under so much pressure?
Facing strong headwinds from skyrocketing inflation and rapidly rising interest rates in much of the world, the price of Bitcoin has plunged 60% so far this year. And it is down 72% from the all-time high it reached on November 10 last year. That’s when central banks, including our own RBA, marked yet another year of low inflation and low rates.
That party came to an end this year. A year in which the RBA has raised rates from a record low of 0.10% to the current 2.60%, and more rate hikes are likely to follow in a bid to control inflation.
The US Federal Reserve has been even more aggressive, raising the benchmark rate in the world’s largest economy to the current 3.25%. And looking ahead, Fed officials are striking a significantly more aggressive tone than RBA Governor Philp Lowe.
Which brings us back to the price of Bitcoin.
More specifically, the price in US dollars against Australian dollars.
Why is Bitcoin Price Outperforming for Australian Crypto Investors?
One of the side effects of the Fed’s aggressive tightening has been the strengthening of the US dollar against most other world currencies. The dollar has also gained amid growing geopolitical uncertainties due to its safe-haven status.
This has caused the value of the Australian dollar to drop from 76 US cents in early April to just under 63 US cents today.
Which means that Australian crypto investors selling their holdings for US dollars will receive a welcome foreign exchange boost.
Commenting on this relative advantage for Bitcoin investors, Capital.com Australia COO Brian Gould said:
The strength of the US dollar has meant that Australian dollar traders who entered Bitcoin at current price levels in mid-June saw a 10% return over four months, should they choose to cash in their coins and convert the profits into US dollars to Australian dollars.
Those Australian traders interested in the dual diversification of cryptocurrency returns that have a low correlation to equity and commodity markets, as well as the US dollar diversification inherent in cryptocurrencies during uncertain times for inflation and assets of risk, now they profit simply by holding their positions.
In fact, on June 18, the Australian dollar was worth 69.3 US cents. Today it is trading at 62.7 cents on the dollar.
On June 18, the price of Bitcoin stood at US$19,045, right where it is trading today.
That’s in US dollars, mind you.
But Australian crypto investors who bought on June 18 and opt to sell today will be up 11.5% in Australian dollar terms.
Watch out for the gap.