Morgan Stanley predicts that the dollar will crash further while Bitcoin could reach above its $20,000 price level, its previous all-time high as we are reading more in the latest Bitcoin news.
The gloomy outlook for the US dollar left BTC with more potential to continue the bull run to the $20,000 price level. The dollar’s sell-off speed up over the week and its value against foreign currencies and dropped by another 0.21 percent in overnight trading. The US dollar index reached 90.22 which is the lowest level since April 2018. This is why Morgan Stanley predicts further declines for the US dollar. Mark Wilson, the chief investment officer and chief US equity strategist for Morgan Stanley said that he sees the US dollar crashed by another 10 percent in the next 12 months. The analyst noted that the Federal Reserve and the US government was the most aggressive with structural deficits because of the COVID pandemic as he added:
“A weaker dollar is helpful for the world. A stronger one is more of a constriction on global growth […] It is ultimately a positive story for reflation.”
Analysts at JP Morgan & Chase believe in a bearish US dollar outlook for 2021 as the bank lead portfolio manager in Asia Julio Calegari said that China’s post-pandemic growth reduced the investment appeal for the USD. The statements emerged as BTC continued to trade near its all-time high of $19,915. This brought the year-to-date profits up by 179 percent and the BTC/USD exchange rate increased by 5.62 percent, completely opposite of the US dollar index performance. Both BTC/USD and DXY showed an inverse correlation this year especially during the March-crash as the BTC price crashed by 60% in just two days.
On the other hand, it showed some strength and increased by 8% during the same time frame. They were moving in the opposite direction because the investors looking for cash safety against the uncertain economic outlook led by the super-fast growing COVID-19 pandemic. The stock markets crashed and people unloaded their profitable positions elsewhere to raise dollars. The large scale intervention by the Federal Reserve and the US government eased the cash demand and committed an injection of $3 trillion worth of liquidity via unlimited bond purchasing by trying to expand their fiscal deficit.
The dynamics haven’t changed for 2021 and the US economy is experiencing a rapid increase in the COVID-19 infection rates. In the meantime, another bill proposing to inject about $908 billion into the US economy, widening the deficit. The Federal Reserve confirmed that they will keep the bond-buying pace during the lower interest rates environment and the investors increased their bets that the bank will buy longer-dated US Treasury notes because the yields are already nearing zero.
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