Earlier this year, Nasdaq-listed MicroStrategy converted $ 425 billion into bitcoin cash reserves. The company’s CEO, Michael J. Saylor, said that bitcoin has much more potential in the long run than holding fiat currency.
Good example to follow
Many analysts agree that MicroStrategy’s bitcoin investment has led many other companies, investors, funds and asset managers to look at cryptocurrency from a different perspective. Something that most bitcoiners (Bitcoin enthusiasts) have understood for a long time, that is, that bitcoin can protect against inflation.
– Michael Saylor (@michael_saylor) November 18, 2020
#Bitcoin is a monetary network that gets stronger as more individuals and companies adopt it to protect their treasury reserves. The fire in cyberspace is spreading …
The result is visible, the price of bitcoin increased 150% this year and reached $ 18,500 yesterday. A good amount of money could guarantee that bitcoin will reach its historical record of $ 20,000. But there are even more important factors to the price of bitcoin. A Citibank analyst expects the US dollar to be worth less. Citibank is the same bank whose director predicted a $ 318,000 bitcoin price last week.
Dollar will decrease 20% in 2021
Citibank analyst Calvin Tse wrote in one study the prospects for a weaker US dollar. He said the dollar could fall by up to 20% by 2021, referring to the risk of reducing consumer spending with the advent of a vaccine, as well as the Federal Reserve’s continued stimulus program.
We believe that vaccine distribution will mark all of our signposts for the bear market, allowing the dollar to follow a path similar to that of the beginning of 2000 until approximately 2005. Can the dollar fall 20% just next year? We think so.
If there is economic uncertainty, you will see that many investors around the world will be fleeing to the dollar. They sell their positions and accumulate the world reserve currency. In March 2020, the dollar was one of the biggest beneficiaries, as the Covid19 blockages led to the financial markets crash. Even bitcoin has plunged nearly 60% in just 48 hours of trading.
Bad year for the dollar
But the prospects for economic recovery are improving. This is pushing the US dollar down. The fiat currency has already fallen more than 4% this year compared to a basket of foreign currencies.
Using balance for bitcoin
A weaker dollar could cause large companies to rethink their capital allocation strategy. Stan Weiskoph, from ETH Think Tank, highlights the power of corporate balance sheets and how they can benefit from invest in Bitcoin.
He used Apple as a reference, a large technology company with a cash balance of around $ 192 billion. If a substantial part of this is used to invest in bitcoin, the cryptocurrency will rise to an unknown high price:
Since the company cannot make a major acquisition to significantly accelerate growth, why not use the power of the balance sheet to jump into the world of digital assets?
Correlated Bitcoin and Dollar
Above you can see the correlation between the DXY, the dollar value against other major fiat currencies. DXY is represented by the green line and blue is bitcoin in dollars. As the dollar increases in value, consequently, the value of bitcoin fell, for example, in March, when many investors preferred dollars.