Bitcoin Investors Take a Deep Breath At $5,525 As Morgan Stanley Says USD Bull Run Days Are History
Bitcoin Struggling At $5,500 As US Dollar Slumps
Currency markets are going through a period of flux this week. As bitcoin slumps to one-year lows, the US Dollar has also fallen in value.
As reported by CoinGape, bitcoin’s weak prices have been accompanied by a slumping US Dollar – and there could be more pain ahead for America’s national currency. A recent Morgan Stanley report claims the US Dollar’s bull days could be over.
Bitcoin has dropped 10% over the last few days. Some believe the price drop is linked to the ongoing hashwar with Bitcoin Cash (BCH). Others believe it’s just another symptom of a prolonged bear market that refuses to break.
After slumping suddenly earlier this week, bitcoin appears to be holding steady at around $5,500. Last week, bitcoin appeared to be holding strong at $6,400. Then, bitcoin broke through the $6,000 support level. Now, the goalposts have moved once again, and $5,500 appears to be a key support level.
Over the last 24 hours, bitcoin has pared its losses, dropping just 1.14% in the last day.
Other cryptocurrencies have witnessed similar drops over the past week, experiencing fresh lows in the midst of a bear market.
Interestingly, XRP is one of the few cryptocurrencies in the green. XRP has gained 3% over the last 24 hours while holding relatively steady at around $0.48. Over the last few days, XRP has maintained its status as the world’s second largest cryptocurrency by market cap, surpassing ETH. XRP’s market cap currently sits at $19.5 billion, slightly higher than ETH’s $17.8 billion cap.
Morgan Stanley Sees Pain Ahead For The US Dollar
Morgan Stanley, meanwhile, recently released a report indicating tough times may be ahead for the US Dollar.
“We believe the USD has reached its peak at around current levels. The USD may weaken as credit spreads widen, equity prices fall, and sovereign bond yields also begin falling amid disinflationary pressure and falling oil prices.”
The US Dollar has been riding a bull wave for a significant length of time. According to Morgan Stanley, however, the US Dollar’s bull days could be over.
The US Dollar slumped later in the week after a top US Federal Reserve official indicated interest rates would be kept neutral due to caution over slowing economic growth.
Uncertainty about Brexit is also affecting the market, creating instability across the global financial system.
The US Dollar has remained strong over the last year because interest rates have continued to rise in the United States. With a neutral outlook for US interest rates, however, the US Dollar is starting to weaken.
As the US Dollar weakened, stock market indexes, gold, and several other major currencies rose against it. If the US Dollar continues to slump, then gold is widely expected to rise.
As an alternative asset, bitcoin could also rise as the US Dollar slumps. Investors could see bitcoin as a safe haven – similar to how gold has been traditionally viewed.
Morgan Stanley’s report also expressed concern about the foreign investment pouring into the United States:
“Instead of strong inward foreign direct investment or other long-term flows, we see evidence that flows to the U.S. have been into money market funds and are carry trade motivated,” explains Morgan Stanley in its report.
This suggests that the United States has been receiving foreign investments at a strong rate, but that many of these investments are short-term and prone to reversal: they’re not long-term investments into fundamental parts of the US market.
What’s Next For The US Dollar And Bitcoin?
If Morgan Stanley’s latest report is to be believed, then the US Dollar will continue to weaken. This could be good news for bitcoin. However, 2018’s bear market continues to grip the market, and it’s possible more pain could be ahead for bitcoin hodlers in the near future.