A report by Denmark-based Saxo Bank claims bitcoin’s price could rise by 165% to more than $2,000 due to an economic stimulus expected from incoming President Trump. The bullish bitcoin outlook is one of 10 Saxo Bank “Outrageous Predictions for 2017.”
Central banks may be about to give up on qualitative easing and negative interest rates, but they are far from being finished with intervention and distorting the allocation of capital and the price of money, according to Steen Jakobsen, CIO.
This is not Saxo Bank’s official outlook for 2017, the company noted in the report, but the events and market moves it deems as “outliers.”
The Trump-promised fiscal spending binge is expected to add to the approximate $20 trillion of U.S. national debt, tripling the current U.S. budget deficit from about $600 billion to $1.2 trillion to $1.8 trillion.
The spending will cause U.S. growth and inflation to skyrocket, forcing the Federal Reserve to accelerate its hikes and the U.S. dollar to soar to new heights.
This creates a domino effect in emerging markets and China in particular, leading people globally to seek alternative currencies and payment systems that are not tied to central banks. Central banks engage in exhausted monetary policies that are in full financial repression mode.
Cryptocurrencies are here to stay given the history of booms and busts in fiat money and debt excesses, the report noted. Bitcoin in particular benefits from this chaos.
If the banking system, as well other nations such as Russia and China, moves to accept bitcoin as a partial alternative to the U.S. currency and the traditional banking and payment system, bitcoin’s price could easily triple over the next year from the current $700 level to $2,100 and beyond as the block-chains decentralized system, an inability to dilute the finite supply of bitcoins, and low to no transaction costs gains more traction and acceptance globally.
The emerging market powers’ desire to move away from being tied to the banking system also bodes well for blockchain technology, the report noted. Banks will continue to adopt blockchain-based payment systems which are expected to gain adherents as they adjust to zero interest rates and the decrease in systematic risk.
Also read: As central banks sell off record US debt, blockchain offers cost cutting for financial industry
Other 2017 Saxo Bank predictions are:
• China’s GDP swells to 8% and the Shanghai composite index hits 5,000.
• The Federal Reserve fixes 10-year treasuries at 1.5%.
• High-yielding bond default rate exceeds 25%.
• The European Union seeks rapprochement with the U.K. over Brexit and cuts deals on immigration and financial services.
• Copper prices reach $1.25 per pound as a sober assessment of Trump’s ability to deliver on spending emerges.
• The inflated U.S. healthcare bubble pops from reforms that drive a 50% fall in selected stocks.
• The Mexican peso soars despite Trump.
• Italian banks outperform the EU banking sector.
• The EU stimulates growth through mutual Euro bonds.
Images from Shutterstock and Saxo.