Goldman Sachs analysts are pessimistic about the US dollar in the short term.
Goldman Sachs, the US$ 71.4 billion investment bank, is supposedly pessimistic in relation to the US dollar. For Bitcoin (BTC), which recently rose above the dreaded $11,100 level, this could serve as a potential catalyst.
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Bitcoin is entering the last two months of the year with significant uncertainty. But if the dollar continues to fall, this could boost the pace of BTC and gold in the fourth quarter.
The daily Bitcoin Revolution chart. Source: TradingView.com
Why Goldman Sachs is not optimistic about the dollar
Zach Pandl, co-director of Global FX, Rates and EM Strategy at Goldman, predicts that the dollar will reach the 2018 low.
In a note to clients obtained by CNBC, Pandl and his team of analysts identified two main factors. First, Pandl said the potential „blue wave“ in the election remains a significant risk to the US dollar index (DXY). Second, the outlook around vaccines for OVID-19 remains unclear.
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On September 30, Moderna CEO Stéphane Bancel told FT that the vaccine was probably not ready before the election.
Lack of clarity about vaccine production and distribution, as well as electoral risk, could hurt the dollar’s momentum. Pandl wrote:
„In our view, an electoral ‚blue wave‘ in the US and favorable news about the vaccine schedule could return the commercially weighted dollar and the DXY index to their 2018 lows.
If the dollar falls, this will naturally benefit alternative value stocks like Bitcoin and gold. As the alternative assets are valued against the dollar, the decline of the DXY causes other reserves of value to increase.
In addition to the falling dollar, Pandl has also noted that potential vaccine discoveries can increase risky assets. Thus, if institutions see Bitcoin as a risky asset, this may further increase sentiment around the BTC. Pandl wrote:
To be sure, there are important risks: we are very uncertain about the length of the vote count (especially for the Senate) and the stock market’s reaction to a ‚blue wave‘. But the wide margin in current polls reduces the risk of a delayed election result, and the prospect of short-term vaccine breakthroughs may provide a barrier to risky assets“.
Bitcoin’s technical framework remains optimistic
- A persistent narrative around Bitcoin’s medium-term performance has been its long-term structure.
- Bitcoin’s weekly and monthly charts remain highly positive due to BTC’s reaction in the $10,500 to $10,700 support range.
- On October 12th, Bitcoin rose above $11,500 for the first time since September, demonstrating a strong momentum.
- BTC’s recovery above the $11,300 resistance level is critical because it follows a series of negative events in October.
From accusations against BitMEX to US President Donald Trump’s resistance to the stimulus package, BTC has faced a number of events that could have led to a sharp downturn.
After a prolonged period of stagnation throughout September, recent Bitcoin price activity remains positive.