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Famous investment bank Goldman Sachs seems to think that the short and medium-term future of the US dollar is looking bleak. A bearish approach from the multi-billion dollar bank towards the dollar could traject a rally from investors towards other assets – especially safe havens like cryptocurrency and commodoties – which won’t lose value with the fiat currency.
Can Bitcoin benefit from bearish dollar?
Historically, investors have fled from the fiat when it is in a consistent slump and put their funds towards other assets. Bitcoin and gold have become safe havens to hedge against the dollars and 2020 has been a clear indicator of the inverse relationship. For the last few months, since recovering from a dip in March, Bitcoin has seen healthy growth with consistent levels of support gaining value.
While the end of 2020 might seem unpredictable, given the state of the global economy and the uncertain trends of the young asset, Bitcoin bulls are more vocal about the possible rallying future of the cryptocurrency market. Experts and analysts are expecting a bull rally, predicted to hit in 2021 given the historic data following the Bitcoin halving.
If Bitcoin has positive sentiment surrounding it, it’s possible that it will attract a wave of fresh investors flooding into the market if the dollar plummets.
Dollar in for a rocky ride with the US election
Global FX head and EM Strategy at Goldman Zach Pandl foresees that the dollar will sink to the lows of 2018. He believes this is as a result of two things:
- The US presidential election, which is a major risk to the US Dollar Index; and
- The global pandemic and uncertain plausibility of vaccines for the COVID-19 vaccines.
He wrote:
“In our view, a ‘blue wave’ U.S. election and favorable news on the vaccine timeline could return the trade-weighted Dollar and DXY index to their 2018 lows. To be sure, there are important risks: we are most uncertain about the length of the vote count (especially for the Senate) and the equity market reaction to a ‘blue wave’. But the wide margin in current polls reduces the risk of a delayed election result, and the prospect for near-term vaccine breakthroughs may provide a backstop for risky assets.”