According to the CEO of Pantera Capital, cryptocurrencies are the best way to store your wealth during the Fed rate hike.
Cryptocurrencies to protect capital
Dan Morehead said:
"I think at the end of the day 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."
Pantera Capital Founder and CEO Dan Morehead stated that digital assets will be the best way to protect one's capital after the possible fallout from rate hikes by the US Federal Reserve.
Stock and crypto investors are eagerly anticipating the direction the Fed might take to combat rising inflation, which topped 7.5% in the US this month.
Even though the crypto market has suffered since the end of 2021, the CEO believes that digital assets will be the best way to protect capital during the aftermath of the Fed's actions.
“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.”
He added:
“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.”
Morehead also highlighted an earlier statement he made during a conference call with investors earlier this month, in which he noted that asset classes like gold and cryptocurrencies don't directly correspond to interest rates like bonds do.
“Whereas 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.”
Morehead acknowledged that while the crypto market is reacting to the Fed's recent moves, the value proposition of digital assets has remained the same, while the falling prices may also have been a consequence of the US fiscal tax year coming to an end.
“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. Kept everything in the markets.”
“Last year $1.4 trillion in capital gains was created in cryptocurrency. That could have accounted for a fair chunk of recent sales."
However, Morehead noted that there could be many ups and downs before the crypto market bounces back up.
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