US Federal Reserve inflation is about to pressure the prices of bitcoin (BTC) and ether (ETH) even further, before returning to all-time highs in 2025, according to Bloomberg analyst Mike McGlone.
Before the latest Fed rate hike to be announced this week, the market expects a minimum increase of 75 basis points, however some fear it could reach 100 basis points, which would represent the largest rate hike in 40 years.
Speaking with financial news outlet Kitco News on Saturday, McGlone, chief commodity strategist at Bloomberg Intelligence, suggested that there is more carnage in the market for BTC cards, ETH, and the broader crypto sector as Fed actions will continue to dampen investor sentiment:
“We have to move on to the overall big picture and what has been putting pressure on cryptocurrencies this year is the Fed’s hammer.”
BTC is down 13.4% over the past seven days to around $19,350 at the time of writing, while ETH is down 20.7% over this time frame to around $1,350.
ETH’s 20% drop in particular has been a cause for debate, as the asset’s price has plummeted since the long-awaited merger that took place on September 15.
With the major upgrade of the network essentially “buying the rumor, selling the news event,” McGlone believes that ETH could drop to “$1,000, or even a little bit,” given how tight the Fed is and will continue to be this year.
“I fear the [merger] is going too far,” McGlone said, adding that the ETH drop is “within a broad macroeconomic bear market for all risky assets.”
During the interview, McGlone went so far as to predict that the latest rate hike could cause an asset crash that is worse than the collapse of the 2008 housing bubble:
“I think it will be worse than the 2008 correction, worse than the major financial crisis.”
The Fed started easing in 2007, then added massive liquidity. They can’t do that anymore.
However, there is of course a little hypnosis, as McGlone also directs BTC to bounce back strongly and reach a new all-time high of $100,000 by 2025, while being very bullish on ETH in the long-term due to the future potential of institutional adoption.
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Looking elsewhere, other analysts and experts have shared a similar amount of Maclone’s short-term pessimism. Speaking to the New York Times on Monday, Christina Huber, chief global market strategist at Invesco, noted that the Fed’s latest announcement will be pivotal because of “what it could mean for stock market direction for the rest of the year.”
“The Federal Reserve has been the main driver of the stock market this year, and it’s been mostly bad,” she said.
While Cathy Wood, CEO of Ark Invest, added to her warning last week that continued increases by the Fed could instead trigger deflation, noting in a tweet on Sunday that “the Fed is solving supply chain problems by squashing Demand is, in my view, unleashing the downturn, preparing it for a major pivot.”