In a new strategy session with crypto analyst Benjamin Cowen, Alden says that the Federal Reserve’s continued interest rate hikes are likely going to keep downward pressure on crypto assets.
“Right now in their hiking cycle, they’ve been hiking into a decelerating economy because they view inflation as the primary concern. They think that higher interest rates are a key way to get that under control. And so we see a similar dynamic to late 2018. That’s kind of been the story of all of 2022, hiking into that weakness.
And so I think as long as you have that dynamic, that is a challenging place for Bitcoin and similar assets. That doesn’t mean you have to have new lows. It’s quite possible that we’ve seen the lows. But I also don’t think it means that you’re going to get another straight up bull market anytime soon, until you have a shift either in policy or perception of that policy.”
Alden also says that the markets are assuming the Fed’s hawkish policies will eventually succeed to bring down inflation but notes it’s possible that they don’t work. If they don’t, it could lead to people losing faith in the Fed’s policies and investing in alternative assets.
“Right now, whenever you see higher inflation or whenever you see a strong labor market, the market is still fully assuming that the Fed has this under control, that if they get hawkish enough, they can crush this, they can cause this structural period of disinflation if they’re just tight enough.
And I think that, in the long run, not going to be rewarded because the inflation is largely fiscal driven, it’s largely outside of the Fed’s control. If anything, their interest rate hikes, even though they can quash some private sector inflation, they can exacerbate public sector inflation.
I think if the market realizes that at some point, if basically inflation keeps breaking out and they’re already in a recession and we’re still in inflation, that’s when I think you could get a shift and people say, ‘Well, wait a second, maybe more rate hikes are not going to get inflation under control, and maybe want to be in scarcer assets.’”
Bitcoin is trading for $20,125 at time of writing, a 7.4% dip during the last 24 hours.
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