Cryptocurrencies

Cryptocurrencies to take massive losses as Fed ends ‘crazy’ speculation by raising rates, says JPMorgan strategist

Cryptocurrencies to take massive losses as Fed ends 'crazy' speculation by raising rates, says JPMorgan strategist

Bitcoin has fallen since hitting an all-time high in November.Marvin Recinos/Getty Images

  • Cryptocurrencies are set to plunge even further as the Fed raises interest rates, a senior JPMorgan strategist has said.

  • “At some point I expect to see massive losses in crypto because there is nothing there,” David Kelly told Insider.

  • Kelly’s crypto-skepticism may not be universally shared at JPMorgan, which ventured into the metaverse on Tuesday.

Cryptocurrencies are likely to plunge even further as the Federal Reserve raises interest rates and ends an era of “crazy” speculation, according to a senior JPMorgan strategist.

“At some point, I expect to see massive losses in crypto, because there’s nothing there,” David Kelly, chief global strategist at JPMorgan Asset Management, told Insider.

Cryptocurrencies have already fallen sharply, with bitcoins dropping from a high of over $68,000 in November to around $44,000 on Wednesday. the market capitalization of all cryptocurrencies fell from over $3 trillion in November to less than $2 trillion today.

Investors have diverted from riskier investments, as the Fed prepares to raise interest rates several times in 2022 in an effort to keep inflation under control.

But Kelly said the rout isn’t over yet, and he argues that digital assets are particularly at risk because they serve no purpose. “It’s still pixie dust and very vulnerable to higher interest rates,” he said.

Pandemic-era stimulus from the Fed has forced bond yields to rock-bottom lows, prompting investors to turn to highly speculative investments such as cryptocurrencies, veteran strategist says and unprofitable tech stocks.

“If you push real interest rates positive, you will starve crazy ideas of cash and funneling money to projects that actually have a real, positive economic return,” he said. -he declares.

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Kelly’s skepticism of digital assets is not universally shared within JPMorgan, which gives clients access to crypto investment products.

The lender has a dedicated blockchain unit, called Onyx, which revealed on Tuesday that it has bought a space in an encrypted metaverse called Decentraland. A metaverse is a virtual world where avatars can interact with each other, play games, hold meetings, trade assets, and many other activities.

Kelly’s thinking is more in line with that of JPMorgan CEO Jamie Dimon, who in October called “worthless” bitcoin. Still, Dimon said the bank’s customers are adults and the bank will give them access to digital assets if they want it.

The Fed could shake up markets if it moves faster than investors currently expect, Kelly said — perhaps by raising interest rates by 50 basis points in March, in response to searing inflation numbers from January.

“Anything with very high valuations would be vulnerable, if you expect the Fed to be more aggressive early on,” he said.

Read the original article at Business Intern