JP Morgan CIO Bob Michele on Tuesday said the rising dollar could spark the next economic crisis. Michele explained that the dollar's value against foreign investments and assets could drive a domino effect.

Dollar-denominated assets, a hot pick among foreign investors, are typically viewed as being safer, promising greater returns, and having a better earnings outlook.

However, a significant portion of the purchases is converted to domestic currencies, including the Euro and the Yen via the derivatives market. If the dollar rises further, and as contracts roll, investors may be left scrambling. Such a scenario would compel them to sell other assets to mitigate losses.

The U.S. dollar index, which measures its performance against a bunch of currencies, is at nearly a 20-year high. In recent weeks, both the Euro and the pound have seen sharp declines.

While the U.S. Federal Reserve has been raising interest rates amid inflation, Japan has kept rates low. It's the same situation in Europe.

The Fed has raised rates to 3 to 3.25%, while the European Central Bank (ECB) had a 1.25% rate as of early October.

The situation is compounded by the ongoing energy and oil crisis in Europe. While the U.S. is a major producer of natural gas and oil, much of Europe has relied on Russian energy.

The Fed has indicated it could raise interest rates up to 4% by next year in a bid to stave off inflation.

"The Fed is very clear that they want to get inflation back to 2%. When you start piecing everything together, rates have got to go higher than where they are, and they are going to stay there for a while," Michele said.

However, it appears soaring rates and the rising dollar could spell trouble for the global economy.