Pantera Capital’s CEO and founder, Dan Morehead, said that digital assets would be the best place to store capital in the event of interest rate rises by the U.S. Federal Reserve.
Investors in stock and crypto markets are focused on what direction the Fed will take to counter rising inflation, which has topped 7.5% at the end of the month.
The movements of Bitcoin and cryptocurrency markets are often correlated to stock market trends. However, Morehead stated in his February 16 newsletter that bonds and stocks will bear the brunt if the Fed makes a “massive policy Uturn” in relation to raising interest rates.
Despite the fact that the crypto market has been in decline since late 2021 the CEO said that digital assets would be the best place to store capital during the fallout from the Fed’s actions.
“I believe our markets will soon decouple. Investors will think that bonds will be crushed when the Fed becomes the only buyer and seller on Earth. Rising rates will make real estate and equities less appealing.
So, how can one invest in stocks and bonds when they are both falling? They are usually negatively correlated. He said that Blockchain is a legitimate place to invest in this world.”
#Bitcoin is down 19% year-on-year – during a time when the Fed printed $5 Trillion — seems cheap. The Next Mega-Trade: https://t.co/kfWepItKpe pic.twitter.com/MgGz2bD6BB
— Dan Morehead (@dan_pantera), February 17, 2022
Morehead added to his argument by highlighting a prior statement he made earlier this month during a conference call to investors in which he said that asset classes like crypto and gold don’t correspond directly to interest rates like bonds.
Blockchain is not a cashflow-oriented thing. It is like gold. It can behave in a very different way from interest-rate-oriented products. He said that investors will have a choice. If rates rise, then blockchain will be the most attractive option.
Related: Biden expected issue executive order next week on crypto and CBDCs: Report
Morehead acknowledged that although the crypto market has responded to Fed’s recent movements, the value proposition for digital assets has remained the exact same. However, decreasing prices could also be a result the U.S. fiscal tax year ending.
“Some of the crypto selling pressure was unintended tax positions. Imagine a trader buying and selling BTC/ETH, XRP, and other crypto assets. It was a great year. A lot of money was made. It all went into the markets.”
“The cryptocurrency capital gains of $1.4 trillion were created last year. He said that this could have accounted for a significant portion of recent sales.
However, he did mention that there may be many ups and downs in the market before it surges again.
Eileen Wilson –Technology and Energy
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