If you have been following cryptocurrency trends in the last few weeks, you most likely have noticed that the value of most, if not all, cryptocurrencies have gone down in the same period. Although cryptocurrency tokens can increase in value annually, the value is also very volatile and is affected by the market and events happening in the world. Many investors who bought cryptocurrency as an asset are selling and cashing out of their investments. It is not happening only to cryptocurrency but to many other investments. People are selling their investments such as gold and bonds and choosing to hold united states dollars instead. The main reason for this is the United States dollar index, also known as DXY. It is a tool used to compare the United States dollar to other currencies and assets available in the market.
The DXY is currently at a record high and has not been at the same level in almost 20 years. Investors who react to market trends use this scale to control their investment, sell most of their assets, and remain with the dollars as they have better value than the investments. There are many reasons why the U.S. dollar index is at this record high. Some of the reasons or factors causing this increase include: The first is the uncertainty in the market. Many international factors are causing problems in almost all fields of work. Some of the most notable factors driving the tension include; the first inflation happening worldwide. The worst thing about this is that the inflation is caused by the other two factors causing uncertainty, the COVID-19 pandemic and the war between Russia and Ukraine. The pandemic led to money printing which is a sure way to increase inflation in a country, while the war is leading to financial challenges for most countries in the world due to reduced oil and natural gas in the market.
The war and the pandemic have also led to supply chain issues which are another red flag making the united dollar more potent than most fiat currencies and other assets. The statistics released by the Personal Consumption Expenditure Index or the PCE caused the sudden increase of the United States dollar on the U.S. Dollar index. Over the last several years, the index has been the primary source of information for the U.S. Dollar index. The information provided on the index that scared the DXY developers and thus the entire DXY report was that the USA economy had shrunk by 1.4% in the first quarter of the year. Combined with other factors, it led economists to believe that America is heading towards a recession. A USA depression is likely to be a global recession considering the country’s economic impact on the world. Combined with increased interest rates on loans, it scared most investors to sell their assets and wait for the recession with cash at hand, which they could loan out for higher interest rates.
