Why The U.S. Dollar And Bitcoin Keep Rising

Jon Blogosphere, Crypto Currency, Market Commentary

I have covered the many reasons why the U. S. dollar (USD) has strengthened in dozens of posts over the past 5 years, (Could the U. S. Dollar Rise 50%?, January 12, 2011), and I described the positive dynamics of bitcoin last summer in An Everyman’s Guide to Understanding Cryptocurrencies (June 13, 2016), back when bitcoin was under $600.
The USD (as measured by the US Dollar Index) has gained almost 40% from 73 in 2011 to 102 recently, and bitcoin recently topped $1,000 (trading at $921 as this article goes to print).
These gains aren’t trivial, nor are they magic. They are the result of basic economic forces: supply and demand, utility, liquidity, capital flows and risk management.
Capital migrates to where it flows with the least resistance, i.e. to forms of capital that are liquid and offer low transaction costs – what I call ease of flow. Capital also migrates to relatively safe havens that are liquid and offer low transaction/holding costs, and to forms of capital with global utility.

This post was published at PeakProsperity on Friday, January 6, 2017.