Bitcoin has collapsed in recent weeks, with a “flash crash” panic triggering catastrophic bitcoin price predictions (just as Elon Musk breaks his silence on bitcoin).
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The bitcoin price slump, wiping away 15% as bitcoin falls from an all-time high of around $126,000 to under $108,000, comes as the price of gold has surged to fresh all-time highs and traders are braced for a $6.6 trillion Federal Reserve flip.
Now, as the U.S. dollar hurtles toward a massive game-changer, analysts are warning of an “imminent dollar and financial crisis” that’s put bitcoin on the brink.
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The U.S. dollar has seen its value collapse this year as the bitcoin price soars along with gold.
getty
“Gold is up 64% and silver 87% so far this year,” Peter Schiff, an investor and gold bull who’s known for his criticism of bitcoin, posted to X. “If you don’t think this portends an imminent dollar and financial crisis, you’re in denial.”
The bitcoin price has matched gold’s rally over the last 12 months, with the pair surging as part of the so-called “debasement trade” that’s seen traders turn to hard assets like gold, silver and bitcoin as hedges against money printing and inflation that reduces the dollar’s purchasing power.
Earlier this month, the billionaire chief executive of Wall Street giant Citadel, Ken Griffin, issued a serious warning over the dollar’s role as a global safe haven.
“We’re seeing substantial asset inflation away from the dollar as people are looking for ways to effectively de-dollarize, or de-risk their portfolios vis-a-vis U.S. sovereign risk,” Ken Griffin told Bloomberg. “Gold is at record highs and the appreciation in dollar substitutes—in crypto, for example—is unbelievable.”
This month, the Fed is widely predicted to cut interest rates again later this month after restarting its paused rate cutting-cycle last month in what some think could unleash a further gold and bitcoin price surge.
Markets are pricing in a 99% chance of a 25 basis point cut at the next Fed meeting, set for October 29, which would lower the federal funds rate to a range of 3.75%–4.00%, according to the CME FedWatch Tool, even as inflation remains well above the Fed’s target of 2%.
The coming consumer price index (CPI) report, due this Friday amid a government shutdown, is expected to show that September inflation came in at 3.1% year-on-year, according to Bloomberg’s consensus forecast.
“Short-term rate differentials are also moving against the dollar, with markets now pricing 5bp over 50bp for Fed cuts by the end of the year,” ING analysts wrote in a note this week. “In such a volatile environment, it’s hard to pick a bottom for the dollar.”
Meanwhile, the chances of a larger 50 basis point cut by the Fed are climbing, with additional cuts expected before the end of the year which would free up money that could be invested in risk assets such as bitcoin.
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The bitcoin price has moved sharply lower in recent weeks, with bitcoin crash fears emerging alongside a looming U.S. dollar crisis.
Forbes Digital Assets
Bitcoin’s recent “flash crash” has, however, put traders on alert that further bitcoin price declines could trigger a major crypto market crash.
“Retail gets liquidation, while institutions manage risk. The problem last weekend was the inability to execute a core risk-management function efficiently. Indeed, it was a stress test for the entire system,” analysts with Tagus Capital wrote in an emailed note.
“But there’s another danger heading into the last two weeks of October. If we’re again in a highly levered situation with altcoins, and bitcoin drops 10%, alts can easily go down 40–50% if the interest remains weak, and it’s game over.”