The CEO and founder of leading blockchain venture fund Pantera Capital, Dan Morehead, stated that digital assets will be the “best place” to store capital following the potential fallout of interest rate hikes from the U.S. Federal Reserve.
Investors across stock and crypto markets are currently fixated on the direction the Fed might take to combat rising inflation which topped 7.5% as of this month.
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Bitcoin and crypto markets have often moved in correlation to trends in the stock market, however, Morehead argued in his Feb. 16 newsletter that bonds, stocks, and real estate will cop the brunt of the Fed‘s “massive policy U-turn,” in relation to hiking interest rates.
Despite the crypto market suffering a downturn since late 2021, the CEO suggested that digital assets will be the “best place” to store capital during the fallout of the Fed’s actions:
“I think our markets will decouple soon. Investors are going to think: bonds are going to get crushed as the Fed goes from the only buyer on Earth to seller. Rising rates will make equities and real estate less attractive.”
“So, where does one invest when both stocks and bonds are falling? (Normally they are negatively correlated.) Blockchain is a very legit place to invest in that world,” he added.
#Bitcoin is down -19% year-on-year — during a period when the Fed printed $5 trillion — seems cheap.
— Dan Morehead (@dan_pantera) February 17, 2022
To add to his point, Morehead also highlighted a previous statement he made during a conference call with investors earlier this month in which he pointed out that asset classes such as gold and crypto don’t directly correspond to interest rates as bonds do.
“Whereas blockchain isn’t a cashflow-oriented thing. It’s like gold. It can behave in a very different way from interest-rate-oriented products. I think when all’s said and done, investors will be given a choice: they have to invest in something, and if rates are rising, blockchain is going to be the most relatively attractive,” he said.
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Morehead admitted that while the crypto market appears to have responded to Fed’s movements of late, the value proposition of digital assets has remained the same, while the decreasing prices may also have been a result of the U.S. financial tax year coming to a close:
“Some of crypto selling pressure has been unintended tax positions. Imagine a trader actively buying and selling BTC, ETH, XRP, etc. Great year. Made a ton of money. Kept it all in the markets.”
“There were $1.4 trillion of cryptocurrency capital gains created last year. That could have caused a decent chunk of the recent sales,” he added.
He did note, however, that there could be a lot and ups and downs before the crypto market goes on to surge again.