Bitcoin / USD remains strong after a little drive towards $ 11,000. The pair is moving up towards $ 12,000 and does not seem to want to return to the fateful $ 10,000 threshold. Statements by Fed Chairman Jerome Powell last week on inflation have boosted safe-haven stocks. The overall context remains extremely favorable in both the short and long term.
The fall of the dollar
There is not BTC but also USD in the BTC / USD pair… The weakness of the greenback is to be taken into account when it comes to anticipating the trend ahead. From this point of view, there is a real boulevard in favor of cryptocurrency.
The head of the division forex (foreign exchange market) of A.G Bisset believes that the US dollar will dive 36% against the euro in the coming year. Towards levels we haven’t seen in over a decade.
This is a crystal ball forecast but large forex banks such as Goldman Sachs, UBS and the Societe Generale also expect further declines. The dollar is also at its lowest since 27 months against the single currency. It is also down 11% since the 2020 peak on the Dollar Index (a measure of the dollar’s exchange rate against a basket of currencies).
According to the Bank of America, selling the dollar on forex is the flagship trade for 36% of hedge fund managers. The CFTC (Commodity Futures Trading Commission) figures shown on the curve above (in oragen) indicate that bets against the dollar are at their highest for almost 10 years in the Futures market.
Why is the dollar falling?
We observe an alignment of the planets with the lower interest rates in the United States and on the other hand inflationary fears due to the US budget deficit. Indeed, the rate spread is a key factor in exchange rates. The reason being that a European investor will prefer to invest in US debt which yields 3% per year (he must therefore first exchange euros for dollars) rather than in German debt which yields 0%.
Away from 10-year rate between the United States and Germany being lowest since 2014, it follows that investors have less and less incentive to invest in US debt. Hence the decline of the dollar.
Goldman Sachs for example, expect the EUR / USD pair to rise to 1.30 by 2023 (against 1.20 currently). The bank TD securityShe believes the Fed’s new approach to inflation will weigh on the dollar. According to her, the dollar is overvalued by 10% compared to other major currencies.
What is true for EUR / USD is also true for BTC / USD or the price of gold in dollars. Indeed, if inflation is higher than interest rates (return on savings), what is the point of keeping fiat money? The return on your savings does not even compensate for inflation, so time impoverishes you …
So it’s best to accumulate gold and Bitcoin even if they don’t earn any interest. Gold rose by 115% since 2008. And what about Bitcoin which was worthless at that time … It’s better than the savings book that pays off 0.50% per year…
The exorbitant privilege at risk
The dollar’s status as an international reserve currency is in doubt. According to a Bank of America poll of market veterans, half of them expect the dollar’s share of global foreign exchange reserves to shrink over the next few years.
Rick Rieder, forex chief of BlackRockRather, he expects the dollar’s decline to remain modest. In particular thanks to the privileged status of the dollar which is the currency in which almost all the oil in the world is sold.
This statement from a spawner of the world’s largest investment fund should put you on the spot. What about the dollar once China (largest oil importer in the world) will buy all its oil from Iran in yuan ? Recall that the Middle Kingdom has planned to invest the equivalent of $ 400 billion to develop the Iranian oil industry …
And what will happen when Qatar, Iraq and even Saudi Arabia accept currencies other than the dollar as payment for their black gold? What will be the next international reserve currency ? …
Short-term BTC / USD trend
The economic calendar for the week is not very busy but it will be necessary to watch closely the ” No farm payroll “(Job creation in the United States). These have been very strong in recent weeks but a further slowdown could do business for BTC / USD.
We will also need to keep an eye on central bankers. Many will speak after the speech of Jerome powell. Listen up because the ECB is likely to align with the Fed and its new inflation target of 2% in average…
It will therefore be necessary to follow the speeches of Kashkari (FED, Wednesday, 8 p.m.). But above all Schnabel (BCE, Thursday, 5 p.m.) and Lane (Friday 5 p.m.). Any statement in favor of a flexible rate of inflation will be bullish for Bitcoin. And yes, the more Central Banks print, the more Bitcoin will appreciate …
Weekly BTC / USD chart (one candle = one week) :