Bitcoin and cryptocurrency prices have skyrocketed over the past year, in part due to the US Federal Reserve’s ultra-low interest rate policy and huge cash injections into the financial system.
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Fed Chairman Jerome Powell, appointed last week for another four-year term by President Joe Biden, oversaw the largest monetary stimulus program in U.S. history to help offset the economic effects catastrophic effects of the Covid-19 pandemic – with bitcoin and crypto prices booming. with the stock market and many other assets.
Now billionaire crypto investor Mike Novogratz has warned that Powell could trigger a collapse in the bitcoin and crypto market in 2022 as he acts to curb soaring inflation that has peaked in 30 years.
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“We have inflation showing up, you know, in a pretty bad way in the United States,” said Novogratz, managing director of bitcoin and crypto-focused financial services firm Galaxy Digital. CNBC, asking, “Is the Fed going to have to move a little faster” to curb the rise in prices.
“It would slow down all assets. It would slow down the Nasdaq
After cutting interest rates and launching huge stimulus packages at the start of the pandemic, central bankers around the world are under increasing pressure to act in the face of soaring inflation.
In recent weeks, the Fed has reduced its bond purchases, with the minutes of its latest monetary policy meeting revealing that officials are considering further cutting its quantitative easing measures.
Novogratz also warned that “people are getting pretty bearish” on bitcoin and cryptocurrencies after the huge rallies last year, with the price of bitcoin rising nearly 200%, the price of Ethereum in up 600% and Ethereum rivals Solana, Binance BNB and cardano up to several thousand percent.
Meanwhile, other bitcoin and crypto market watchers echoed Novogratz’s concerns.
“[Last week we had] further proof that bitcoin behaves more like a risk asset than a hedge against inflation in the form of a sharp spike when news broke that Biden had decided to rename Jerome Powell – gold, by contrast , dropped, ”Noelle Acheson, head of market analysis at leading digital brokerage firm Genesis, said in comments sent via email.
“This links bitcoin to the outlook for real interest rates which, if they remained low or even negative in the short term, would support further growth in risky assets. The risk is that real interest rates could rise up to a level that is starting to stifle growth and liquidity while reaching asset valuations in the broader market while providing a more attractive alternative. “
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However, despite warnings about the price of bitcoin, ethereum, and other cryptocurrencies, Novogratz expects Wall Street and other major financial institutions to continue to rush into the bitcoin market and of crypto after a scramble in space this year.
“The number of institutions that Galaxy is seeing moving into this space is staggering,” Novogratz said. A recent survey by Nickel Digital Asset Management found that 82% of institutional investors and wealth managers plan to increase their exposure to cryptocurrencies through 2022 and through 2023.
“I was on the phone with one of the largest sovereign wealth funds in the world today, and they made the decision to start investing in crypto,” Novogratz added. “I have had the same conversations with large pension funds in the United States.