According to Bloomberg analyst Mike McGlone, the Fed’s inflation “sledgehammer” is about to hit Bitcoin (BTC) and ether (ETH) prices further before recovering to new all-time highs in 2025.
Before the latest Fed rate hike was announced this week, markets were pricing in at least 75 basis points of rate hikes, but some feared it could be as high as 100 basis points — the largest ever. 40 years.
In an interview with financial news media Kitco News on September 17, Bloomberg Intelligence senior commodity strategist McGlone said: Suggest Further market carnage is likely for BTC, ETH, and the broader cryptocurrency industry as the actions of the Federal Reserve will continue to dampen investor sentiment.
“We have to turn to the big picture and what’s weighing on cryptocurrencies this year, and that’s the Fed’s sledgehammer.”
At the time of writing, the price of BTC has fallen 13.4% to around $19,350 over the past seven days, while ETH has plunged 20.7% to around $1,350 over the period.
ETH’s 20% drop in particular has been a reason for discussion, as the asset’s price has plummeted since the much-anticipated and long-awaited merger on Sept. 15.
With major network upgrades essentially leading to “buy the rumor, sell the news event,” McGlone believes ETH could drop to “$1,000, or even lower,” as the Fed’s hawkishness will and will continue to be, this year.
“I’m afraid [The Merge] It’s overpriced,” McGlone said, adding that ETH’s price drop was “within a major macroeconomic broad bear market across all risk assets.”
In the interview, McGlone even predicted that the latest rate hike could lead to an asset crash worse than the 2008 housing bubble collapse.
“I think it’s going to be worse than the 2008 correction, worse than the Great Financial Crisis.”
“The Fed started easing in 2007, and then they added a lot of liquidity. They can’t do that anymore,” he added.
However, there is of course a bit of hope, as McGlone also predicts that BTC will rally strongly and hit an all-time high of $100,000 in 2025, while he is bullish on ETH in the long term due to the potential for future institutional adoption.
related: Markets won’t surge anytime soon – so get used to dark times
Looking elsewhere, other analysts and pundits share similar short-term pessimism about McGlone. Kristina Hooper, chief global market strategist at Invesco, said in a Sept. 19 interview with The New York Times famous The Fed’s latest announcement will be crucial because of “what it could mean for the direction of the stock market for the rest of the year.”
“The Fed has been the main driver of the stock market this year, and it’s mostly been bad,” she said.
While Ark Invest CEO Cathie Wood also added in last week’s warning that the Fed’s continued rate hikes could eventually lead to deflation, tweeting on Sept. 18, “The Fed is tackling the supply chain by suppressing demand. The problem, in my opinion, is to unleash deflation and get ready for a major pivot.”
This inflation started less than two years ago and was exacerbated by Russia’s invasion of Ukraine this year due to COVID and supply chain bottlenecks. The Fed is addressing supply chain issues by suppressing demand, which in my opinion will unleash deflation, making it a major pivot.
— Cathy Wood (@CathieDWood) September 17, 2022