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Earlier this year, Nasdaq-listed MicroStrategy converted its $ 425 billion worth of cash reserves into Bitcoin. Explaining his bold call to invest in an asset that remains notoriously volatile and unregulated, company CEO Michael J. Saylor said it has “better long-term appreciation potential than holding cash.”
Many analysts have agreed that MicroStrategy’s investment in the Bitcoin market has prompted many other companies, investors, family offices and wealth managers to look at cryptocurrency from a different perspective: that of a store of value that can protect its holders from inflation. . Now, many of them have openly admitted that they bought Bitcoin.
The result is visible in the cryptocurrency spot and derivative markets. The BTC / USD exchange rate has now risen nearly 150% in 2020, after breaking above $ 18,500. Analysts expect the pair to continue its rally towards $ 20,000, its record high set in December 2017.
Bitcoin has been trading 350% since its mid-March nadir. Source: BTCUSD on TradingView.com
Meanwhile, their bullish trend is receiving additional fuel from a very bearish dollar forecast.
Greenback in trouble
Citi analyst Calvin Tse discussed the prospects for a weaker US dollar in his research note. He said the greenback could decline by as much as 20% in 2021, citing the risks of a lower appetite driven by the arrival of the COVID-19 vaccine, as well as the Federal Reserve’s ongoing stimulus program.
“We believe vaccine distribution will eliminate all of our bear market signals, allowing the dollar to follow a similar path to that experienced since the early to mid-2000s,” said Tse. “Can the dollar drop 20% next year alone? We think so. “
Investors rush to the US dollar in times of global economic uncertainty. In March 2020, the greenback was one of the biggest beneficiaries when blockages caused by the increase in COVID-19 cases led to a global market rout. Even Bitcoin, an asset that changes roles between risk-off and risk-on, has plummeted nearly 60% in just 48 hours of trading.
The collapse of the US dollar index has fallen more than 10% since its mid-March peak. Source: DXY on TradingView.com
But the prospects for economic recovery are improving. This adds downward pressure on the US dollar. This year it has already fallen by more than 4% against a basket of foreign currencies.
Bitcoin adoption coming soon
A weaker dollar forecast could lead large companies to rethink their capital allocation strategy. Stan Weiskoph, the lead ETF Strategist at ETH Think Tank, highlights the strength of companies’ balance sheets and how they can make the most of investing in Bitcoin.
He treated Apple as a benchmark, a large tech company with a cash balance of around $ 192 billion, adding that their reallocation in the cryptocurrency market alone could drive Bitcoin to new all-time highs. Excerpts from the report:
“Since the company cannot make a significant acquisition to accelerate growth significantly, why not use the strength of the balance sheet to take a leap into the world of digital assets?”
#Bitcoin it is a monetary network that strengthens as more individuals and societies adopt it to protect their cash reserves. The fire in cyberspace is spreading … https://t.co/FYECxu56EK
– Michael Saylor (@michael_saylor) November 18, 2020
So it appears that weaker dollar sentiment would move companies into the Bitcoin market in 2021.
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