The US Federal Reserve is expected to raise interest rates several times over the coming months.
Dan Morehead, CEO and founder of leading blockchain venture fund Pantera Capital, believes that cryptocurrencies are the best option for people to store their wealth during a Fed rate hike.
The US Federal Reserve is expected to hike rates at least four times by the end of the year. The Fed is trying to address rising inflation in the United States and is expected to make a move during next month's FOMC meeting. Morehead said :
"At the end of the day, I think investors have a choice: they have to invest in something, and when interest rates go up, blockchain will be the most attractive in relative terms."
He suggested that cryptocurrency remains the ideal investment despite the market being in a bearish trend for the past four months. Morehead added:
“I think our markets will decouple soon. Investors will think: Bonds will be crushed as the Fed goes from being the only buyer on Earth to being a seller. Rising interest rates will make stocks and real estate less attractive.”
Morehead said the crypto market is better than bonds and other financial markets right now:
“So where do you invest when both stocks and bonds are falling? (Usually they are negatively correlated.) Blockchain is a very legitimate place to invest in this world. While blockchain is not a cash flow oriented thing. It's like gold. It can behave very differently than interest-oriented products. I think when all is said and done, investors have a choice: they need to invest in something, and when interest rates rise, blockchain will be the most attractive in relative terms.”
The cryptocurrency market has suffered huge losses since the beginning of the year, with the total market cap below $2 trillion at the time of writing. Morehead pointed out that the crypto market has recently reacted to the news from the Fed. He emphasized:
“Part of the crypto selling pressure has been unintended tax positions. Imagine a trader who is actively buying and selling BTC, ETH, XRP, etc. great year. Made a lot of money. Stored everything in the markets. Last year, $1.4 trillion in cryptocurrency capital gains were created. That could have accounted for a fair chunk of recent sales.”
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