The US Federal Reserve’s inflationary “sledgehammer” is poised to drive bitcoin (BTC) and Ether (ETH) prices further down before hitting new all-time highs again in 2025, according to Bloomberg analyst Mike McGlone. .
Looking ahead to the latest Fed interest rate hike to be announced this week, the market expects a minimum increase of 75 basis points, although some fear it could reach 100 basis pointswhich would mean the biggest rate hike in 40 years.
Speaking to financial news outlet Kitco News on Saturday, McGlone, a senior commodity strategist at Bloomberg Intelligence, suggested that a further loss is on the way for the BTC, ETH, and crypto sector in general, as the Fed’s actions will continue to dampen investor sentiment:
“We have to move on to the macro picture and what has been putting pressure on crypto this year and that is the Fed gavel.”
BTC price has fallen by 13.4% in the last seven days to around $19,350 At the time of writing this article, while ETH has plunged a hefty 20.7% in that time frame to around $1,350.
ETH’s 20% drop, in particular, has been a source of discussion, as the price of the asset has fallen since the much-anticipated merger took place on September 15.
Since the major network upgrade essentially resulted in a “buy on the rumour, sell on the news event”, McGlone thinks ETH could drop to “$1,000, or even a little lower” given how tough the Fed has been and will continue to be this year.
“I fear that [La Fusión] got too much hype,” McGlone said, adding that ETH’s price drop is “within a major broad-based macroeconomic bear market for all risk assets.”
During the Interview, McGlone went so far as to predict that the latest rate hike could cause an asset crash worse than the 2008 housing bubble:
“I think it’s going to be worse than the 2008 correction, worse than the Great Financial Crisis.”
“The Federal Reserve started loosening up in 2007, and then added massive liquidity. They can’t do that anymore,” he added.
However, there is a sliver of hope; McGlone also predicted that BTC will rebound strongly and hit a new all-time high of $100,000 in 2025, while he is very bullish on ETH in the long run due to future potential for institutional adoption.
On the other hand, other analysts and experts have shared a short-term pessimism similar to that of McGlone. Speaking to the New York Times on Monday, Kristina Hooper, chief global markets strategist at Invesco, said the Fed’s latest announcement will be pivotal because of “what it could mean for the direction of the stock market for the rest of the year.”
“The Fed has been the main driver of the stock market this year, and it has been mostly bad,” he said.
Ark Invest CEO Cathie Wood warned last week that continued Fed hikes could instead end up causing deflation, and he claimed in a Sunday tweet that the “Fed is solving supply chain problems by crushing demand and, in my opinion, triggering deflation, setting it up for a major pivot.”
This inflation started fewer than two years ago with COVID and supply chain bottlenecks, exacerbated by Russia’s invasion of Ukraine this year. The Fed is solving supply chain issues by crushing demand and, in my view, unleashing deflation, setting it up for a major pivot.
— Cathie Wood (@CathieDWood) September 17, 2022
This inflation began less than two years ago with COVID and supply chain bottlenecks, exacerbated by the Russian invasion of Ukraine this year. The Fed is solving supply chain problems by crushing demand and, in my opinion, triggering deflation, setting it up for a major pivot.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
Keep reading:
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.
