A dark outlook for the US dollar leaves Bitcoin with the potential to continue its bull run toward $ 20,000.
Sales of the greenback accelerated this week as its value against foreign currencies fell another 0.21 percent in overnight trading. The US Dollar Index (DXY) reached 90.22 on Thursday, its lowest level since April 2018, which prompted Morgan Stanley to anticipate further reductions for the trade-weighted instrument.
Mark Wilson, the chief investment officer and chief US equity strategist for Morgan Stanley, told Bloomberg that he sees the US dollar plummet by another 10 percent within the next twelve months. The analyst noted that the Federal Reserve and the US government had been “most aggressive with structural defects” in the midst of the coronary virus pandemic.
“A weaker dollar is useful to the world,” he added. “A stronger one is more of a constraint on global growth […] Ultimately, it is a positive story for rejection. ”
Analysts were at JP Morgan & Chase Co. also believes in a bearish US dollar forecast for 2021. The bank’s top portfolio manager in Asia’s rates and forex, Julio Calegari, said China’s post-pandemic growth reduced the greenback’s investment appeal.
Bitcoin
The releases appeared as Bitcoin continued to rise near its all-time high of $ 19,915. That brought its profit so far up 179 percent from this Tuesday. The BTC / USD exchange rate was up 5.61 percent on a weekly schedule, the complete opposite of the US dollar index performance.
Bitcoin holds key support levels near $ 19,000 despite the latest sales. Source: BTCUSD on TradingView.com
BTC / USD and DXY have shown an inverse correlation this year, especially after the global market order in mid-March. In the month, the price of Bitcoin fell almost 60 percent in just two days. On the other hand, the dollar showed strength and jumped 8 percent around the same period.
They moved opposite because investors were seeking cash security against uncertain economic prospects led by the rapidly spreading COVID-19 pandemic. As governments announced locksmiths, the stock market collapsed. That led to people downloading their lucrative jobs elsewhere to raise dollars.
Nevertheless, large-scale intervention by the Federal Reserve and the US government eased the demand for cash. They committed together to inject around $ 3 trillion worth of liquidity through the purchase of unlimited bonds and by deciding to expand their fiscal deficit. As a result, the dollar collapsed, and Bitcoin – thanks to its secure homepage narrative – rose higher.
$ 20K
The dynamics remain unchanged for the year 2021. The US economy is experiencing a rapid rise in its COVID-19 infection rates. Meanwhile, a bipartisan bill proposes to inject some $ 908 billion into the US economy, further widening the deficit.
In its most recent minutes, the Federal Reserve has confirmed that it would keep the bond buying speed intact amid a lower interest rate environment. Meanwhile, investors have increased their bets that the bank would now start buying outdated U.S. Treasury notes because yields on the short-term ones were already near zero.
All in all, the scenario makes Bitcoin a stronger investment alternative to US dollars and bonds. That explains why the cryptocurrency could cut out over $ 20,000 in the upcoming quarterly sessions.