The economist, however, added that cryptocurrencies and gold markets are extremely small to absorb major adjustments in the $6.6 trillion global foreign exchange. But overall, he expected that Bitcoin and gold would gain in the US dollar’s decline.
It is not the depleting savings that could put pressure on the US dollar.
What It Means for Bitcoin
Bitcoin is finding it hard to sustain its rally above $11,000. Source: TradingView.com
Mr. Roach said that he anticipates the Federal Reserve’s expansionary approach to further trim the greenback. As Bitcoinist also covered earlier, the US central bank’s decision to keeping interest rates near zero until 2023 and target inflation above 2 percent, would maintain the US dollar under dangers of further declines.
Earlier this year, many renowned names from the mainstream financial sector associated themselves with Bitcoin. That included billionaire hedge fund manager Paul Tudor Jones who allocated 1-3 percent of his $22 billion worth portfolio to Bitcoin Futures. Also, a public-traded firm MicroStrategy bought $425 million worth of BTC in two different rounds.
“In summary, the vice is tightening on a still-overvalued buck,” Mr. Roach wrote.
The fall in national savings happened despite a brief uptick in personal savings, the Yale faculty added. It revealed that the Americans failed to outrun a record expansion in the national deficit budget. That occurred especially after the US government approved $1,200 relief cheques to unemployed Americans.
A tightening US dollar upside could leave Bitcoin in a better-than-expected bullish bias, also noted Mr. Roach but back in June 2020.
They cited a weakening US dollar outlook as their primary cause of their Bitcoin investments.
Published at Tue, 29 Sep 2020 08:16:58 +0000
While the move boosted personal savings, the need to spend that money led to a sharp decline from 33.7 percent in April to 17.8 percent in July. Mr. Roach noted that that savings rate would fall further as the Americans seek another round of relief measures from the US Congress.
At the time of his statement, BTC/USD was trading 148 percent greater from its mid-March nadir of $3,858.
So says Stephen Roach, the former chairman of Morgan Stanley Asia. The pro-Bitcoin economist wrote in an op-ed that the US dollar could fall by up to 35 percent by the end of 2021 due to strengthening foreign currencies, rapid macroeconomic imbalances in the US, and the end of the American hegemony over global reserve assets.
Mr. Roach stressed that the net national savings rate in the US has plunged into negative territory for the first time since the 2008-09 economic crisis. It did so with an unusually higher downside momentum, falling 3.9 percentage points in the prior quarter — the sharpest decline since 1947.
A recent sharp pullback move in the US dollar market is insufficient to log a full-fledged upside breakout.
“With the national budget deficit exploding towards 16 percent of gross domestic product this fiscal year, according to the Congressional Budget Office, the economies plunge is only a sign of what lies ahead,” the economist wrote.