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Investment strategist at Bank of America noted that the economy is going towards the inflation, and the Feds are trying their best to curb it
On Wednesday, the Federal reserves said that it would more likely double the pace of its pulling the assets as it did in its tightening exercise before. They have a goal to reach $9 trillion in their balance sheet by meeting in early May. According to the sources, many investors also expect that the Central Bank will hike its interest rate by almost 50 points.
Chief Investment strategist at Bank of America, Michael Hartnett, wrote in a note to clients from the bank regarding Inflation shock worsening, beginning of rates shock, upcoming recession shock, and the context, case commodities, volatilities and cryptocurrencies that could outperform bonds and stocks.
As Hartnett Outlined, in the recent events, the economy is headed in the direction of another recession. That crypto is being expected to outperform all other traditional assets and the asset basket’s alternative options. Crypto and commodities would do far better than stocks and bonds in layman’s terms. He also said that amidst the inflation concerns, there is a need to recall the time of the second half of 2021.
Compared to the patterns emerging from recorded inflation levels peak last year, analysts at JP Morgan had ascribed the crypto surge to the fears of inflation back in October last year. A JP Morgan representative stated that the investors’ re-emergence of these inflation concerns had renewed the interest in bitcoin usage as a hedge against inflation.
Considering the inflation picture as it continues to look bleak, there is a repeat in the episode that is not out of the question. Despite the record-making rallies that bitcoin and many other cryptocurrencies had seen in October and November, they had tumbled at the end of December.
However, is there any preparation regarding what would happen if the recession that is being predicted and the stock market drop would bring down the value of cryptocurrencies?
With the tightening of monetary policies of the Federal Reserves and teasing a hike in interest rates, stocks have seen a downward trend. Earlier this year, numerous analysts, including the commentary from the International Monetary Fund, Acknowledged the correlation between the stock and crypto markets that was assumed to be the highest ever.
The IMF report stated back then that the increased correlation between crypto and stocks raised the spillover possibility of investor sentiment between those asset classes.
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Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
