Pantera Capital CEO Dan Morehead says he believes that market participants are missing the forest for the trees when it comes to the possibility of an interest rate hike next month.
Morehead says that the markets are getting it wrong as Bitcoin (BTC) and the majority of crypto assets tumble amid the Federal Reserve’s plan to raise interest rates to combat persistent inflation.
“In this case, I have a very strong conviction that the markets are really getting this wrong, and that the rise in interest rates (which I think was pretty obvious that it was going to happen and will keep happening) is not really that bad for crypto. And relative to the other asset classes, is actually really great for blockchain prices.”
According to the head of the crypto-focused hedge fund, digital assets are unique from other assets in that they’re not impacted by rising rates.
“Bonds, obviously, when rates go up, prices go down. I think bonds are going to get killed. Most other things like equities have cash flows that need to be discounted, which implies lower prices if yields are higher. That’s also true of real estate and most other types of assets.
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.”
Morehead also says that the current correlation between traditional financial markets and crypto will not last. Citing a graphic of Bitcoin’s (BTC) historical trend in the past 11 years, he forecasts that the flagship crypto asset will rebound.
“It shows where Bitcoin, as a proxy for our industry, is in relation to its 11-year log trend. It’s now trading 60% below trend…
I think the markets will be right back. I think it’s like weeks or a couple of months until we’re rallying very strongly. We are quite bullish on the market, and we think prices are at a relatively inexpensive place.”
According to Pantera, Bitcoin only spent 12.7% of its history below the trend.
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