Goldman Sachs analysts expect the US dollar to continue to decline. For Bitcoin and gold, that could mean a solid fourth quarter performance.
Goldman Sachs, the $71.4 billion investment bank, is down against the US dollar. For Bitcoin (BTC), which has recently recovered above the feared $11,100 level, this could serve as a potential catalyst.
Bitcoin is heading into the last two months of the year with significant uncertainty. But if the dollar continues to fall, it could boost the momentum of BTC and gold in the fourth quarter.
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Zach Pandl, co-head of Global FX, Rates and EM Strategy at Goldman, predicts that the dollar will hit a record low in 2018.
In a note to clients obtained by CNBC, Pandl and his team of analysts pointed out two main factors. First, Pandl said that the possible choice of the „blue wave“ remains a significant risk to the US dollar index (DXY). Second, the outlook for COVID-19 vaccines remains unclear.
On 30 September, Moderna’s CEO, Stéphane Bancel, told the FT that the vaccine would probably not be ready until after the election.
Lack of clarity on vaccine production and distribution, as well as electoral risk, could hamper the dollar’s momentum. Pandl wrote:
„In our opinion, a ‚blue wave‘ election in the US and favourable news on the vaccine schedule could return the trade-weighted dollar index and the DXY to their 2018 lows.
If the dollar falls, it would naturally benefit alternative reserves of value such as Bitcoin and gold. Since alternative assets are traded against the dollar, a fall in the DXY causes other reserves of value to increase.
In addition to the fall in the dollar, Pandl also pointed out that potential Bitcoin Formula scam vaccine advances could boost risky assets. As such, if institutions view Bitcoin as a risky asset, it could further boost sentiment around BTC. Pandl wrote:
„There are certainly important risks: we are not sure how long the vote count will last (especially for the Senate) and how the stock market will react to a ‚blue wave‘. But the wide margin in current polls reduces the risk of a delayed election result, and the prospect of vaccine advances in the short term may provide support for risky assets.
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Bitcoin’s technical structure remains optimistic
A persistent narrative about Bitcoin’s medium-term performance has been its high time frame structure.
Bitcoin’s weekly and monthly charts continue to be very positive due to BTC’s reaction from the $10,500 to $10,700 support range.
On October 12, Bitcoin broke through the $11,500 mark for the first time since September, showing strong momentum.
The BTC’s recovery above the $11,300 resistance level is critical because it follows a series of negative events in October.
From the charges against BitMEX to the rejection of the stimulus by U.S. President Donald Trump, BTC faced numerous events that could have led to a sharp reversal.
After a prolonged period of stagnation throughout September, Bitcoin’s recent price action remains positive.