Fidelity's Timmer: Dollar Weakness Could Boost Bitcoin

Bitcoin has climbed back above $80,000. The cryptocurrency has extended its sharp recovery from its July lows as renewed demand for spot exchange-traded funds.

At press time, Bitcoin is trading at about $80,357. It is up 2.4% over 24 hours, 10.6% over seven days and 27.6% over the past month. The cryptocurrency briefly moved above $81,000 earlier this week.

In his latest social media post, Fidelity’s Jurrien Timmer argues that continued dollar weakness could become an important tailwind for the leading cryptocurrency by market capitalization.

“It’s telling that the Treasury’s actions last week to buy back more long-dated paper and issue more Bills took down the dollar and caused both gold and Bitcoin to soar,” Timmer wrote earlier.

According to Timmer, markets are beginning to price in a potential “slippery slope “toward fiscal dominance, in which the government’s financing needs increasingly constrain monetary policy.

The Treasury’s decision to increase its purchases of longer-dated government debt is, of course, the main catalyst behind Bitcoin’s blistering rally. On Aug. 19, the Treasury said it would at least double the maximum size of its liquidity-support buybacks for 10- to 30-year securities to improve liquidity. The dollar weakened sharply while gold and Bitcoin surged.

Bitcoin’s accumulation phase

Timmer previously argued that Bitcoin could benefit from the same “rising tide” supporting gold. At the same time, he has cautioned that gold may lead the move because the bellwether cryptocurrency lacks its own catalyst.

He has also described Bitcoin as potentially being in an accumulation phase.

The flagship cryptocurrency is approaching the long-term power-law support levels that he follows.

It remains to be seen whether Bitcoin can establish itself as part of the broader “debasement trade.”

Bitcoin’s break rally above $80,000 that has been accompanied by renewed ETF demand shows that the cryptocurrency may already be beginning to catch up to the lustrous metal.