The United States Federal Reserve is expected to increase interest rates multiple 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 Fed rate hike.
The US Fed is expected to increase interest rates at least four times before the end of the year. The Fed is looking to tackle the rising inflation in the United States and is expected to make a move during next month’s FOMC meeting. Morehead said;
“I think when all’s said and done, investors will be given a choice: they have to invest in something, and if rates are rising, blockchain is going to be the most relatively attractive.”
He suggested that cryptocurrency remains the ideal investment despite the market being in a bearish trend for the past four months. Morehead added that;
“I think our markets will decouple soon. Investors are going to think: bonds are going to get crushed as the Fed goes from the only buyer on Earth to seller. Rising rates will make equities and real estate less attractive.”
Morehead said the crypto market is better than bonds and other financial markets at the moment. He said;
“So, where does one invest when both stocks and bonds are falling? (Normally they are negatively correlated.) Blockchain is a very legit place to invest in that world. Whereas blockchain isn’t a cashflow-oriented thing. It’s like gold. It can behave in a very different way from interest-rate-oriented products. I think when all’s said and done, investors will be given a choice: they have to invest in something, and if rates are rising, blockchain is going to be the most relatively attractive.”
The cryptocurrency market has suffered huge losses since the start of the year, with the total market cap below $2 trillion at press time. Morehead pointed out that the crypto market has been responding to the Fed news recently. He said;
“Some of crypto selling pressure has been unintended tax positions. Imagine a trader actively buying and selling BTC, ETH, XRP, etc. Great year. Made a ton of money. Kept it all in the markets. There were $1.4 trillion of cryptocurrency capital gains created last year. That could have caused a decent chunk of the recent sales.”