The Federal Reserve’s signals of tighter monetary policy in 2022 could provide short-term headwinds for risk assets like stocks and cryptocurrencies, but there is a good chance that Bitcoin (BTC) will stay ahead as investors realize its value as a digital reserve asset according to Bloomberg commodity strategist Mike. McGlone.
The January issue of Bloomberg’s Crypto Outlook described the Federal Reserve’s plan to raise interest rates in 2022 as a “win-win for Bitcoin” scenario. [versus] Stock Market.” The reasons stem from the fact that the S&P 500 is currently most expanding above its 60-month moving average in more than two decades and that Bitcoin sees increased mainstream appeal as an inflation hedge.
“Extended markets are becoming popular, but it appears that commodities and Bitcoin pioneered the early rebound,” McGlone said. “It is a question of how long the bull market lasts, and we see the benchmark cryptocurrency coming into the future.”
The minutes of the Federal Reserve’s December monetary policy meeting on Wednesday revealed that central bankers are ready to curb stimulus support more aggressively than previously expected. The plan includes, at least for now, three interest rate increases in 2022 accompanied by a reduction in the Federal Reserve’s balance sheet, which currently stands at nearly $8.3 trillion in Treasuries and mortgage-backed securities.
Markets may be overreacting in the short term, but it’s hard to overstate the optimism of the Fed meeting minutes.
QE Reduction + 3 Elevation is good, but 3 Elevation + QT Acceleration hasn’t been on anyone’s radar.
– Alex Kruger (@krugermacro) January 6 2022
While reducing stimulus is usually considered negative for risky assets, a broad category that includes stocks and cryptocurrencies, McGlone believes that Bitcoin is uniquely positioned to outperform in this environment:
“Cryptocurrencies are at the top of the list of risk and speculation. If risky assets go down, it helps the Fed to fight inflation. Having become a global reserve asset, Bitcoin could be the primary beneficiary in this scenario.”
Within the broader cryptocurrency market, a Bloomberg analyst said he expects the “permanent trio” – Bitcoin, Ether (ETH) and dollar-pegged stablecoins – to maintain dominance throughout the year.
Data from Cointelegraph Markets Pro and TradingView showed a sharp drop in the value of bitcoin on Wednesday following the release of the Federal Open Market Committee’s meeting minutes. The major cryptocurrency fell below $43,000 for the first time since September and is now down 8% over the past 24 hours.