The value of bitcoin declined sharply this past week, as the US dollar continued to assert its dominance following a string of stronger than expected economic data reports.
The BTC/USD exchange rate rose 0.6% to $654.98 on Saturday, according to CoinDesk. Compared to the previous five days, the BTC/USD is down around 4%.
Support for the US dollar rose sharply this week as investors reacted positively to multiple data reports that pointed to a stronger US recovery. The dollar index, which tracks the performance of the US currency against a basket of six peers that includes the euro, yen, pound, franc, Canadian dollar and Swedish krona, rose nearly 1% over the previous five days to close at 97.47. That was the highest settlement since early March.
Bitcoin's value has wavered after a highly anticipated halving event lowered miners' incentive to mine new coins. Beginning on July 9, miners receive 12.5 bitcoins for every new block they create. They received 25 coins previously.
Despite the recent decline, the cryptocurrency has gained over 50% since the start of the year, thanks to a huge rally in June.
Interest in bitcoin has increased globally, as investors look to diversify away from fiat-denominated assets. Experts say that huge buying interest in China has been largely responsible for the cryptocurrency's ascent in recent months. Others note a growing market for cryptocurrency in Latin America. TigoCTM, a crypto-teller machine, recently introduced Dash services to its roster of digital currencies.
Dash, an open source cryptocurrency that facilitates instant and private transactions, celebrated its second birthday this past January.
Commenting on the potential uptake of cryptocurrency in Latin America, TigoCTM CEO Cindy Zimmerman cited numerous economic and political crises in the region.
"We started this company in Panama because there was no way for anyone there to convert cash into cryptocurrency, and after the financial crisis in Venezuela took hold, the demand for an alternative way of accessing money quickly grew," she said in a statement, as quoted by various crypto news agencies.
"For example, the bolivar has recently seen 100% year over year inflation; bitcoin has been more stable than some local fiat currencies."
Latin America has been hit hard by political corruption, plunging oil prices and sky-high inflation. Brazil, the region's biggest economy, is experiencing a prolonged recession that is expected to intensify this year. The economy of Latin America and the Caribbean as a whole is expected to contract 0.4% this year, according to the July update of the International Monetary Fund's World Economic Outlook report.
Growth in Latin America is expected to improve to just 1.6% in 2017.
In other news, digital currency Ethereum is returning to normalcy following a high-profile hacking event last month resulted in the theft of nearly $60 million worth of investor funds. In an effort to retrieve the stolen funds, the Ethereum community adopted what is known as a "hard fork," which refers to a change in code that many cryptocurrency enthusiasts argue goes against the value proposition of the platform. Forbes described this event as Ethereum's first bailout in a July 21 article.
The outlook on bitcoin remains largely favourable, as global economic uncertainty continues to feed into a market that is enjoying greater legitimacy than ever before. China is seen as an increasingly vital player in the global bitcoin market, as investors there continue to track movements in yuan. China's central bank has been involved in strategic yuan devaluations since last summer.
China's economic growth stabilized at 6.7% annually in the second quarter, outpacing forecasts calling for 6.6%.
GDP data for the United States, United Kingdom and Eurozone will also be released next week, giving investors clues about the health of the world economy. These data releases could impact the performance of the dollar and ultimately the performance of the BTC/USD exchange rate.
In addition to GDP figures, the Federal Reserve and Bank of Japan (BoJ) will also release monetary policy statements next week. The Fed is expected to keep policy unchanged, whereas the BoJ is expected to lower interest rates after Prime Minister Shinzo Abe's upper house election victory earlier this month.
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