The Federal Reserve announces maintaining zero interest rates! U.S. stocks rise, the U.S. dollar index hits a two-year low, and gold challenges the $2,000 mark.

The US dollar index has been falling, the US stock market is experiencing a bubble-like surge, gold prices are soaring, but what about Bitcoin?

Federal Reserve Maintains Zero Interest Rates, U.S. Stock Indexes Soar

The Federal Reserve announced on Wednesday that it will maintain near-zero interest rates of 0-0.25%. The three major U.S. stock indexes, Nasdaq, Dow Jones, and S&P, all rose. Since the outbreak of the pandemic in March, the Federal Reserve (FED) has kept interest rates near zero and introduced various market stimulus and relief policies, allowing the U.S. stock indexes to quickly return to pre-pandemic levels, even surpassing historical highs. The "unlimited printing of money" policy has raised concerns among many economic commentators about the bubble in the U.S. stock market and the threat to the U.S. dollar. This time, the Federal Reserve has stated that it will spare no effort to help economic recovery.

Jim Bianco, CEO of Bianco Research, stated in an interview with Yahoo Finance, "In the short term, the stock market is a market where investors won't lose, but sooner or later there will be a sharp downturn."

A report from Ned Davis Research's clients stated, "The Nasdaq 100 index seems like a bubble to me. Besides the phenomenon of climbing the diving board for speculation, I don't know how else to describe it."

U.S. Dollar Index Drops to Two-Year Low

"Even moms are asking, with the recent continuous decline of the U.S. dollar, where to move their money?"

According to Trading View data, the U.S. Dollar Index (DXY) has dropped to its lowest level since June 2018. Former Asia Pacific chairman of Morgan Stanley, Stephen Roach, even wrote that the dollar could see a decline of over 35%.

Ray Dalio, founder of Bridgewater Associates, has stated that as tensions between China and the U.S. escalate, there is a possibility of the two countries turning into a capital war. On the other hand, the continuous borrowing and money printing by the Federal Reserve, without the recovery of productivity, will severely damage the stability and dominance of the U.S. dollar.

It seems that this event is indeed continuing to unfold.

Gold Challenges the $2,000 Mark

There are increasing predictions in the market that gold prices will soar in 2021, with top financial institutions like Morgan Stanley, J.P. Morgan, and Goldman Sachs all forecasting an upward trend for gold. Bloomberg's latest research report not only predicts a rise in gold but also speculates that the upward trend of precious metals may fuel a bull market for Bitcoin.

Top U.S. financial institutions attribute the rise in gold prices to three main factors, including the "potential devaluation of the U.S. dollar," "economic uncertainty," and an increase in "demand for physical gold." In a column published by Morgan Stanley, Chief Investment Officer Lisa Shalett wrote:

"The value of the U.S. dollar may be nearing its peak, and if the dollar weakens, this may be a good time for some investors to consider adding gold to their portfolios."

According to Bloomberg, one of the four major U.S. banks, Bank of America, even stated in a report titled "The Fed Can't Print Gold" that the bank has raised its 18-month gold price forecast to $3,000 per ounce.

Should Bitcoin Be Happy?

As a cryptocurrency investor, if one blindly views Bitcoin as a hedge asset, it may be necessary to consider the correlation with traditional assets. Looking at the Pearson correlation coefficient, Bitcoin still shows a high positive correlation with the U.S. stock index S&P 500, no correlation with gold, and a low negative correlation with the U.S. dollar index.

Despite the devaluation of the U.S. dollar and Bitcoin's recent breakthrough of the ten-thousand mark, matching the performance of negative correlation, the high positive correlation with U.S. stocks may be the main indicator. If the stock market bubble bursts, investors should still pay attention to the risks.