Wild swings continue to plague the crypto market with Bitcoin and Ethereum failing to rally at every attempt in the last two or so months.
This week, Bitcoin revisited the $42,000 support after losing over 38% in gains since tapping a new all-time high and is currently trading at $41,813. Ethereum plunged after price lost grip on the $3,600 support and is now retailing for $3,108.
Apart from the ongoing demonstrations in Kazakhstan which have affected Bitcoin mining operations with the cryptocurrency’s hash rate dropping by 14%, the release of a hawkish Fed Meeting report mid-last week has further exacerbated the bleeding.
Minutes after releasing Fed’s December minutes on Wednesday which showed the possibility of an earlier than expected interest rate hike as well as considerations about a balance sheet slash, Bitcoin tumbled bringing with it other cryptocurrencies.
Ignore The Noise, Keep Hodling
Whereas a rise in interest rates is good for the U.S. economy, there are lingering claims that the FED’s current attempts to rejuvenate its monetary policy will not be of any significant help at the moment.
According to Dan Tapiero, “Fed will never equalize rates with inflation”. The CEO of 10T Holdings fails to understand how a booming economy, as the government of the day claims, is thriving amidst massive negative real rates.
“-6.8% real rates is a once in a lifetime opportunity to be short cash long assets,” he adds before concluding that hodling Bitcoin Ethereum and Stocks is the only real thing at this time.
“Stay long stocks, Bitcoin and Ethereum. Hodl through short-term volatility. Real Dollar cash savings will continue to lose value.”
Don’t Fight The Fed
There is however hope that a rise in interest rates is still bullish for crypto and other stocks and that there is no need to worry about the FED. According to a 2022 Bloomberg Crypto Outlook report, rising risk assets in 2022 may embolden the Federal Reserve which is already facing the greatest inflation in four decades, favoring the Bitcoin process.
The report further suggests that an increase in interest rates later this year may support a win-win situation for Bitcoin vs the stock market although crypto could come out ahead.
“Peaking commodities and cryptos, alongside declining Treasury yields in 4Q, may indicate a normalization of stock market returns in 2022. If the S&P 500 retreats and stays down a while, we expect Bitcoin to come out ahead, following rising bond prices and gold.”
With the world going digital, cryptocurrencies and by far, Bitcoin has proved that it’s the benchmark crypto-asset, attracting unprecedented demand from both retail and institutional money, a trend that is poised to continue advancing in 2022.
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