Bitcoin suddenly dropped in value in the second half of July, surprising investors. Here’s why its fall is linked to the BRICS’ Johannesburg meeting.
Bitcoin had a fantastic first half of the year, more than making up for the losses incurred in 2022. This meteoric rise, however, risks tumbling down as quickly as it went up, and part of the reason is the BRICS Johannesburg meeting.
Since the middle of August, Bitcoin lost over 11% in value, wreaking havoc in the cryptocurrency market. The whole sector lost over a trillion dollars in evaluation in just a few weeks.
At the same time gold, the world’s safest commodity for investors, dropped a percentage point too.
Conversely, long-term US bonds have risen to a 14-year high in August, gaining significant traction over cryptocurrencies. This right here is the main reason for Bitcoin’s fall, as crypto often follows the opposite path of real yields.
Long-term US bonds are rising because of the Fed’s tight monetary policy. Another interest rate hike seems inevitable in September, bringing the United States closer to recession. In response, investors look for safe havens like long-term bonds, to protect their portfolios.
However, the collapse of Bitcoin has been too sudden to be caused only by the Fed’s intentions. Fed’s Chairman Jerome Powell expressed hawkish intentions since the July meeting, catching nobody by surprise.
According to the behavior analysis platform Santiment, there is another factor causing Bitcoin’s decline.
The BRICS summit
This week the leaders of China, Russia, Brazil, India and South Africa are holding a summit in Johannesburg. The first priority on the agenda is discussing a possible expansion of their economic bloc: the BRICS.
Countries eyed for membership include Saudi Arabia, Iran, Argentina, Indonesia, and the United Arab Emirates. A similar extension of the bloc will ensure a fundamental change in the global order.
Another major point on the agenda is the creation of a common currency between BRICS members, challenging the US dollar global dominance.
The dollar has been the global reserve currency for over eighty years. Its power allowed the United States to control global (and domestic) debt, shaping the world in their financial image.
The BRICS, and especially China, want to change that. Even members opposed to expansion like Brazil and India want some sort of common currency between them.
According to Santiment, “BRICS” is the most researched term in the crypto world. After all, cryptocurrencies were born with the sole premise of ditching the US dollar and creating a new global financial order.
🪙 According to @santimentfeed social data, #BRICS, a summit involving several nations, is the top trending keyword in #crypto. With speculation of a gold-backed currency being introduced during the event, watch how #crypto's correlation measures up. https://t.co/F9GewYnTsI pic.twitter.com/YNUgpYcHQr
— Santiment (@santimentfeed) August 22, 2023
As Bitcoin has failed to realize its promises, crypto holders look for alternatives. And the BRICS’ common currency might provide one.
