Minutes from the Federal Reserve’s last meeting in December showed that officials discussed shrinking the central bank’s swollen $8.3 trillion balance sheet and raising interest rates sooner than expected. The central bank’s hawkish stance could help bitcoin outperform stocks this year.
According to Bloomberg analyst Mike McGlone, who in the January edition of Bloomberg’s Crypto Outlook described the central bank’s plan to raise interest rates this year as a potential “win-win scenario for Bitcoin vs. the stock market.” McGlone noted that the S&P 500 Index is currently the most extended above its 60-month moving average in over two decades.”
Per the analyst, the index’s overextension is being met with BTC seeing growing appeal as an inflation hedge and store of value. McGlone wrote:
Stretched markets have become common, but commodities and Bitcoin appear to be early reversion leaders. It’s a question of bull-market duration, and we see the benchmark crypto coming out ahead.
The Federal Reserve’s plan, for now, is to raise interest rates three times this year while reducing the size of its balance sheet. While this type of hawkish stance is often negative for risk assets, McGlone believes BTC is in a unique position to outperform other assets.
Per his words cryptocurrencies are “tops among the risky and speculative,” and if risk assets decline, helping the central bank’s battle against inflation, Bitcoin “may be a primary beneficiary” if it comes to be seen as a global reserve asset.
When it comes to performance this year, the analyst noted he expects Bitcoin, Ethereum’s ether, and stablecoins to maintain their dominance in the market. As reported, McGlone had late last year shown he was bullish on BTC and ETH for 2022.
In November 2020, McGlone accurately predicted BTC was going to rally to $20,000 in 2021. Last year, the flagship cryptocurrency surged to a new all-time high near $64,000 before its value dropped.
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The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.
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