Bitcoin Slips as Dollar Rises; COVID-19 Hit Poor Hardest


Bitcoin fell about 7% Monday, dipping below $33,000 for the first time since June 8 as the value of the dollar rose and China continued to crack down on crypto mining operations.

Last week, Bitcoin slid nearly 9% after briefly climbing above $40,000.

The price of gold dropped and the dollar rose after the Federal Reserve, the nation's central bank, last week said it may boost interest rates sooner than expected amid concerns about rising inflation.

Jason Deane
Jason Deane, Bitcoin Analyst, Quantum Economics, London (Photo Provided) Photo Provided

"[Federal Reserve Chairman) Jerome Powell's recent comments drove the U.S. dollar higher, triggering a sharp drop in the markets," Jason Deane, analyst at Quantum Economics, in London, told Newsweek. "Generally speaking, since the dollar's strength and Bitcoin price are inversely related, this added to the selling pressure for the flagship cryptocurrency."

The stock market fell about 3.5% as many U.S. investors adjusted their portfolios to new conditions.

The continued slide could signal a prolonged bear market ahead for Bitcoin, or at least stagnant trading within a narrow range.

It's also likely to further increase the gap between retail and major investors, leading to fewer hands holding a larger share of Bitcoin. In general, retail investors sold during the downturn while large investors took the long view of Bitcoin's value and increased their holdings.

MicroStrategy, a major investor in the cryptocurrency often credited with having a hand in driving its price to a record high, announced a $500 million debt offering and will use the net proceeds to buy more Bitcoin.

Technical analysis of Bitcoin's price points to the "death cross"—when the short-term moving average of an asset dips below its long-term moving average—as a key indicator of a possible sell-off and the start of a bear market, Deane said.

"Like many things in the markets, talking about technical-driven events like this can make them happen, even if the fundamentals of an asset outweigh that purely technical indicator," he said.

While no longer breaking news, China's continued crackdown on Bitcoin mining operations continued to spook retail investors and contributed to driving the crypto's price lower.

As much as 65% of the world's Bitcoin mining operations are conducted in China.

Miners attempt to solve complex hexadecimal puzzles to refresh the blockchain, the unbreakable record of transactions, and successful efforts are rewarded with new Bitcoin.

Beijing cited the large amount of electricity used in mining operations as the reason for the clampdown. This is odd given that many miners use clean hydro-electric power and China relies heavily on coal-fired plants to keep the world's second-largest economy growing.

China is developing a digital yuan that may compete with the dollar and shutting down Bitcoin mining operations may be an effort by the government to preserve its monopoly in issuing currency.

The Federal Reserve Bank of Boston and researchers at the Massachusetts Institute of Technology are developing a digital dollar and are expected to ask for public comment later this summer.

The Global Times, backed by the Chinese Communist Party, said about 90% of China's Bitcoin mining capacity has been shut down.

While this is bad news for entrepreneurs in China, and has temporarily depressed Bitcoin's "hash rate," it won't damage mining operations long-term because they will simply shift to other nations.

"For many, there is a belief that higher hash rate leads to a higher Bitcoin price, and that being so, then the converse must also be true," Deane said. "China's continuing forced exodus of the mining industry will almost certainly lead to a far more positive landscape of Bitcoin overall. In reality, it is far more likely that the price is a driver of hash rate."

"Hash rate" is a measure of how many calculations per second are performed to maintain Bitcoin's worldwide network. China's action may lead to short-term disruptions and further depress Bitcoin's price, and could create a "Bitcoin winter."

"In the very short term, the technical indicators imply this is possible," Deane said. "There is definitely uncertainty and lack of direction, despite the extraordinary developments that are happening throughout the world around this asset. This is why, for many, this is a moment of extreme opportunity. Bitcoin remains, in our view, an asset that should be viewed through the lens of a long-term position."

On Monday, the Bitcoin Fear & Greed Index registered 23, or "extreme fear," and an opportunity for gutsy investors, because many timid investors have sold and left the market.

The flip side: When investors are over-eager for further gains in a rising market, a high reading on the greed side of the index may signal a coming correction.

The Bitcoin market doesn't rise or fall randomly, but there's sometimes a significant emotional component in its pricing, especially among retail investors who chase a rising market or sell in a near panic when the market falls.

In the 100-point Fear & Greed Index, published by the website, zero represents "extreme fear" and 100 represents "extreme greed."

The index hit 95 on January 6 and two days later, Bitcoin climbed to a then record-high near $41,000. But the price fell to $28,750 on January 21. The index registered 40 on January 22 and the market soon climbed.

The index isn't based on an algorithm and traces market sentiment.

In general, Bitcoin is worth whatever the markets say it's worth based on supply and demand. The number of Bitcoin worldwide is capped at 21 million. There are about 18.74 million coins now in circulation.

In mid-day trading Monday, Bitcoin changed hands at $32,598.91, down 5.76% in the last 24 hours but still up 12.37% for the year. The 24-hour range is $31,744.99 to $36,119.80. The all-time high is $64,829.14. The current market cap is $610.32 billion, CoinDesk reported.


The lockdown intended to curb spread of COVID-19 hit those at the low end of the wage scale hardest, a Harvard University study found.

The study reviewed employment levels in January 2020 before the pandemic hit and compared it with job figures on March 31, 2021.

Employment for workers earning less than $27,000 a year fell 23.6% during the period surveyed while employment for workers earning $27,000 to $60,000 fell 4.5%, the study found. Employment for high-wage workers, or those earning more than $60,000 a year, increased 2.4%, the researchers said.

Many high-earners worked by computer from home during the lockdown while those at the lower end of the wage scale lost their jobs as businesses closed as part of the effort to curb the spread of COVID-19.

In short, shutting the economy down had the unintended consequence of widening the gap between those at opposite ends of the wage scale.

The findings appear to be confirmed by data from states with strict lockdown orders compared with those with more relaxed rules. California and New York had higher unemployment rates than Florida and Texas.

Anecdotal evidence not part of the study showed that those who could work from home during the pandemic prospered and fattened their savings accounts while service-related workers in retail, restaurants as well as travel and leisure struggled.

Real estate prices rose as many city dwellers with good jobs headed for the suburbs and larger dwellings.

A study by the Federal Reserve, the nation's central bank, found that the COVID-19 pandemic forced the permanent closure of about 200,000 U.S. businesses above historical levels.

Small service providers such as barber and beauty shops appear to be the hardest hit, the study found. Many large retailers, including Brooks Brothers, Lord & Taylor, and Century 21, filed for bankruptcy protection after sales plunged.

The closures meant the loss of service jobs and higher unemployment rates for workers at the low end of the wage scale.

Lockdowns may have been ineffective in curbing spread of the coronavirus.

A study published last year in The Lancet, a British medical journal, reviewed data collected in 50 countries with high infection rates and concluded, "Government actions such as border closures, full lockdowns, and a high rate of COVID-19 testing were not associated with statistically significant reductions in the number of critical cases or overall mortality."

Other factors, such as obesity, may have had a significant impact on death rates during the pandemic.

The economy has rebounded and employment is now rising, but the recovery appears to come at a steep price: Inflation.

Consumer prices rose 5% in May from a year earlier, the sharpest increase in prices since August 2008. Consumers expect inflation to outstrip the Federal Reserve's target of 2% in the immediate future.

The University of Michigan's survey of consumer sentiment showed one-year inflation expectations increased to 4.6% in May from 3.4% in April. The Fed boosted its near-term inflation estimate to 3.4%, one percentage point higher than its March projection.

Like job loss during the pandemic, inflation during the recovery will hit those at the lower end of the wage scale harder than those at the top.

Lower-paid workers typically spend a greater percentage of their income on the basics—rent, food and transportation—than those earning hefty incomes.

The Fed believes higher prices will be "transitory" and are largely the result of a spike in demand and kinks in the supply chain.

While inflation is likely to run ahead of the Fed's 2% target this year and into 2022, government economists expect prices to fall back to the target level.

The current unemployment rate is 5.8%. It peaked at 14.8% in April 2020, the highest rate since data collection began in 1948, the Congressional Research Service reported.