According to a report by CoinDesk, Standard Chartered Bank stated in a research report on Tuesday that the risk of US fiscal dominance is increasing as the Federal Reserve monetizes government debt. This situation should benefit cryptocurrencies as investors seek alternative assets. The bank’s analysts wrote in the report:
Analysts further stated that the risk of US fiscal dominance is likely to have three effects on the US yield curve: a steeper two-year/ten-year nominal yield curve, a greater divergence between spot and forward rates, and an increase in term premia. Bitcoin prices are positively correlated with these potential developments.
In addition, Standard Chartered Bank analysts also pointed out that Donald Trump could also serve as a major catalyst for the rise of cryptocurrencies, as the second Trump administration is expected to provide a more favorable regulatory environment, which would have a positive impact on cryptocurrencies overall.
The analysts noted that if Trump wins a second term in the election, the withdrawal of foreign official buyers of US Treasuries due to fiscal concerns could accelerate. During his first term, the average annual net sales of US government debt amounted to $207 billion, compared to only $55 billion during President Biden’s tenure.
Furthermore, in the report, Standard Chartered Bank reiterated its target price of $150,000 by the end of the year and $200,000 by the end of 2025 for Bitcoin.
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