The crypto industry as a whole is experiencing a severe downturn right now. Bitcoin’s price has dropped by 15% from its weekly high. Since the Merge, Ethereum’s price has fallen by 23 percent from its seven-day moving average.
As the cryptocurrency market tends to mirror the wider financial world, panic in one area can easily spread to another. In contrast, JP Morgan’s global head predicts that the cryptocurrency industry will rise sooner rather than later.
Marko Kolanevic, head of JP Morgan’s global operations, expressed his optimism on the cryptocurrency sector.
JPMorgan Global Chief Upbeat About Crypto’s Recovery
He emphasizes the greater overall financial sector performance and says the financial markets have hit bottom and are poised for a rapid recovery.
Kolanovic expects that the Fed will begin lowering interest rates at the beginning of 2023, bolstering the share market. After that, he reveals, a major rally might be anticipated for risk assets such as crypto.
However, even if true, this assertion may be hard to believe for the ordinary investor. Recent sell-offs in stocks and, most significantly, the cryptocurrency market were sparked by the latest inflation report.
JP MORGAN IS SAYING
“ROBUST EARNINGS, LOW INVESTOR POSITIONING AND WELL ANCHORED LONG-TERM INFLATION EXPECTATIONS SHOULD MITIGATE ANY DOWNSIDE IN RISK ASSETS FROM HERE”
— Gurgavin (@gurgavin) September 19, 2022
In the event of a prolonged market decline, the FOMC meeting on September 21 may prove decisive. The interest rate hike expected on that date is only 75 basis points, according to the reports.
According to an earlier report, the market has already priced in the 75 basis point interest rate increase. Kolanevic also suggests that a potential 100 bps rate increase should not be discounted.
Image: InsideBitcoins
How does this affect the cryptocurrency market? Well, if the analysis proves accurate, the market will eventually return to a net positive position. If the assertion is untrue, the crypto winter will persist.
The second decision may have a substantial impact on the cryptocurrency market. As the crypto market closely follows the broader financial market, a continuation of the stock market’s downward trend will likewise drive cryptocurrencies down.
Kolanevic’s concept of a soft landing for the economy could become a reality if quantitative tightening continues. This early recovery could be feasible if “long-term inflation expectations are well-anchored.”
… But Not Everyone Shares His Optimism
However, Bridgewater Associates founder Ray Dalio is not as optimistic as Kolanevic.
In the next years, he anticipates a rise in bond yields to between 4% and 6%. If this occurs, the increase is due to a considerable reduction in private credit.
This decrease in private credit translates to a decline in private sector credit, which weighs down the overall U.S. economy.
As the markets struggle with dropping prices and pessimistic investor mood, it is only a matter of time before JP Morgan’s speculation proves accurate.
As anxiety pervades in the financial markets, cryptocurrency must face the burden of the current market downturn.
BTC total market cap at $363 billion on the daily chart | Source: TradingView.com Featured image ABC News, Chart: TradingView.com