Goldman’s bearish outlook on the dollar raises sentiment in Bitcoin for Q4

Goldman Sachs analysts are pessimistic about the US dollar in the short term

Goldman Sachs, the 71.4 billion dollar investment bank, is bearish on the US dollar. For Bitcoin (BTC), which recently surpassed the dreaded $11,100 level, this could be a potential decisive catalyst.

Bitcoin is heading towards the last two months of the year with considerable uncertainty. However, if the dollar continues its negative trajectory, it could sustain the momentum of BTC and gold in the fourth quarter.
Zach Pandl, co-director of Global FX, Rates and EM Strategy at Goldman, predicts the dollar will hit its 2018 low.

In a note to clients obtained from CNBC, Pandl and his team of analysts identified two central factors. First, Pandl stated that the potential election victory of the Democrats remains a significant risk for the US dollar index (DXY). Second, the prospects for vaccines against COVID-19 remain uncertain.

On September 30, Stéphane Bancel, CEO of Moderna, revealed to FT that the vaccine will probably not be ready before the election.

The lack of clarity on the production and distribution of vaccines, in addition to the risk associated with the election, could hamper the momentum of the dollar. Pandl commented:

„The success of the Democrats in the U.S. elections and positive news on the front of vaccinations could bring the dollar and the DXY index to the lows of 2018.

If the dollar drops, of course alternative value reserves such as Bitcoin and gold will benefit. Since alternative assets are traded against the dollar, the drop in DXY causes other value reserves to increase.

In addition to the falling dollar, Pandl pointed out that potential progress in vaccine development could help risky assets. Consequently, if institutions consider Bitcoin a risk asset, this possibility could further improve sentiment in the BTC market:

„Undoubtedly, there are important risks: we are uncertain about the duration of the vote count (especially for the Senate) and the reaction of the stock market to a ‚blue wave‘. But the wide margin in current polls reduces the risk of a delayed result, and the prospect of progress on the vaccine in the short term could provide support for high-risk assets“.

Bitcoin’s technical structure remains optimistic

The structure on short intervals was a persistent narrative for Bitcoin’s medium-term performance. Bitcoin’s weekly and monthly charts remain highly positive thanks to BTC’s reaction from the support range between $10,500 and $10,700.

On October 12, Bitcoin exceeded $11,500 for the first time since September, showing strong momentum. BTC’s recovery above the $11,300 resistance level is decisive, as it follows a series of negative events in October.

From the accusations against BitMEX to President Donald Trump’s pushback on the grant package, BTC was faced with several events that could have caused a sharp correction. Following a prolonged period of stagnation in September, Bitcoin’s recent price action remains positive.