Impending dollar crash: Will Bitcoin break the $20,000 mark this time?
Given the gloomy outlook for the US dollar, Bitcoin has the potential to continue its upward trend towards $20,000.
The dollar’s sell-off accelerated this week as its value against foreign currencies fell a further 0.21 percent in night trading. The US Dollar Index (DXY) reached 90.22 on Thursday – its lowest level since April 2018, prompting Morgan Stanley to predict further declines for the trade-weighted instrument.
Mark Wilson, Morgan Stanley’s Chief Investment Officer and Chief Strategist for U.S. equities, said the U.S. dollar will by Crypto Engine continue to plummet by 10 percent over the next 12 months. The analyst comments that in the midst of the coronavirus pandemic, the Federal Reserve and the US government have been „the most aggressive with structural deficits“.
„A weaker dollar is helpful to the world,“ Wilson said. „A stronger one is more likely to restrict global growth […] It is ultimately a positive story for reflation.
Analysts at JP Morgan & Chase Co. are also pessimistic about the US dollar outlook for 2021. Julio Calegari, senior portfolio manager for interest rates and currencies, estimates that China’s post-pandemic growth has made the dollar less attractive for investment.
Previously, Bitcoin has risen further to near its recent all-time high of $19,915. As a result, profits have risen by 179 per cent from the beginning of the year to this Tuesday.
The BTC/USD exchange rate rose by 5.61 per cent in the weekly time frame, a complete opposite to the development of the US dollar index.
Both BTC/USD and DXY have shown an inverse correlation this year, especially after the global market routine in mid-March. This month, the price of Bitcoin fell by almost 60 percent in just two days. On the other hand, the dollar showed strength, gaining 8 percent over the same period.
They moved in the opposite direction as investors sought safety in cash, given the uncertain economic outlook created by the rapidly spreading COVID 19 pandemic.
When governments announced freezing measures, the stock market crashed. This led people to reduce their profitable positions elsewhere in order to raise money.
Nevertheless, a large-scale intervention by the Federal Reserve and the US government led to an easing of the demand for money. Together they committed to injecting liquidity worth about $3 trillion through unlimited bond purchases and by deciding to expand their budget deficits.