Crypto investors will incur huge losses as the Fed raises interest rates and ends the era of ‘crazy speculation’. This was said by JPMorgan senior strategist David Kelly in an interview with Business Insider.
At some point I expect a sharp decline in digital asset prices. They are vulnerable to tighter monetary policy, the expert said.
Kelly compared cryptocurrencies to ‘magic powder’. Interest in them was sparked by the Fed’s stimulus policy, which prompted investors to move away from yieldless bonds toward riskier assets.
If real interest rates move back into positive territory, you will deprive yourself of crazy ideas about cash and direct funds to projects with real economic returns. Anything with a very high valuation will be vulnerable if the Fed acts aggressively early, he explained.
Earlier, at the press conference following the January meeting, the Fed Chair Jerome Powell did not rule out raising the key rate in March by 50 basis points. He also allowed tightening monetary policy at every meeting.
In January, Bitcoin fell by 7.5% to below $43,000, according to the minutes published for the December Fed meeting.
In the transcript of the latest rate decision, the Fed noted rising risks to financial stability tied to the rapid growth of crypto assets and DeFi platforms.
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