The Federal Reserve’s signaling for tighter monetary policy in 2022 could provide short-term headwinds for risky assets like stocks and cryptocurrencies, but there is a good chance that Bitcoin (BTC) will continue to come out on top. High as investors recognize its value as a digital reserve asset, according to Bloomberg commodities strategist Mike McGlone.
The January issue of Bloomberg’s Crypto Outlook described the Federal Reserve’s plan to raise interest rates in 2022 as a possible “profit scenario for Bitcoin. [frente] to the stock market. ”The reasons stem from the fact that the S&P 500 is currently the most overextended above its 60-month moving average in more than two decades and that Bitcoin is seeing increasing mass appeal as a hedge. against inflation.
“Stretched markets have become normal, but commodities and Bitcoin appear to be the early reversal leaders,” McGlone said. “It is a question of the duration of the bull market, and we see that the reference cryptocurrencies come out ahead.”
Minutes from the Federal Reserve’s December monetary policy meeting revealed Wednesday that central bankers are willing to aggressively curb their support for stimulus more quickly than expected. The plan, for now at least, includes three interest rate hikes in 2022 accompanied by a reduction in the Fed’s asset balance, which currently stands at nearly $ 8.3 trillion in Treasuries and mortgage-backed securities.
Markets may be overreacting short-term but looking beyond hard to overestimate how hawkish the Fed minutes were.
QE reduction + 3 hikes OK, but 3 hikes + accelerated QT was not in anybody’s radar.
– Alex Krüger (@krugermacro) January 6, 2022
Markets may be overreacting in the short term, but the aggressive tone of the Fed minutes is hard to overestimate.
Lowering QE + 3 hikes is fine, but 3 hikes + QE acceleration was not on anyone’s radar.
Although the reduction in stimulus is often viewed as negative for risk assets, a broad category that includes equities and cryptocurrencies, McGlone believes that Bitcoin is uniquely positioned to perform better in this environment:
“Cryptocurrencies are on top of risky and speculative assets. If risky assets go down, it helps the Fed fight inflation. By becoming a global reserve asset, Bitcoin can be a primary beneficiary in that. stage”.
As for the cryptocurrency market in general, the Bloomberg analyst said that he expects the “enduring trio” – namely Bitcoin, Ether (ETH) and the dollar-pegged stablecoins – to maintain their dominance throughout the year.
Data from Cointelegraph Markets Pro and TradingView showed a sharp decline in Bitcoin’s price on Wednesday following the release of the minutes of the Federal Open Market Committee meeting. The flagship cryptocurrency plunged below $ 43,000 for the first time since September and is currently down 8% in the last 24 hours.