Bitcoin, Ethereum will go ‘much higher’ after recession: Paul Tudor Jones

Paul Tudor Jones said he believes the US economy is either in or on the verge of a recession.

Jones believes recession is on the way

Despite a months-long bear market that has dragged Bitcoin and Ethereum down 70% from their highs, Paul Tudor Jones has made it clear that he believes the top two crypto assets can soar in a post-recession world.

The billionaire hedge fund manager discussed crypto’s place in the current macroeconomic landscape in a Monday interview with CNBC’s Squawk Boxand said he believed the nascent asset class could see significant growth in the future.

Jones shared his thoughts on the current state of the global economy, noting that he believed the US was headed for a recession if it wasn’t already ine. “I would think we’re probably getting ready to go through the recessionary book,” he said, predicting that the 2020s would be defined by a “focus on debt dynamics, fiscal deficits and policies “that give people confidence in the long runs. the running value of a currency.”

Jones said he believed central banks had engaged in “massive experimentation” in the years since the global financial crisis, arguing that depressed yields and pandemic relief packages were products of monetary and fiscal experimentation.

Reflecting on the digital asset space, Jones pointed to high inflation rates as a potential catalyst for a crypto wave. “At a time when there is too much money, which is why we have inflation, and too much financial spending, something like crypto—especially Bitcoin and Ethereum—where there is a limited amount of it, it will have value at some point,” he said.

When CNBCAndrew Ross Sorkin asked if crypto would have a “much higher” value than today, Jones said “I think so, yes,” but admitted he didn’t know when prices would rise.

Jones also commented on the Federal Reserve’s economic tightening policy, which has seen the US central bank raise interest rates by 75 basis points on three occasions this year. The Fed has forecast a top funds rate of 4.6% in 2023, raising economists’ expectations of further increases before the end of the year. The current fund rate is 3% to 3.25%.

As others have predicted, Jones said a pivot in the Fed’s hawkish stance could lead to a rally across global markets. “When [a pivot] coincidentally, you’re likely to have a massive rally in a number of depressed inflation trades, including crypto,” he said. Jones also revealed that he still has an allocation in Bitcoin, having backed the asset repeatedly since touting it as a bet against inflation in 2020.

Macro legends expect crypto boom

Jones is not the first macro legend to suggest that crypto could eventually lead to a recovery despite the gloomy macroeconomic backdrop. Last month, Stanley Druckenmiller shared similar insights to Jones, hinting at a possible crypto “renaissance” if the public begins to lose faith in central banks. He also called for a “hard landing” and recession for the US economy in 2023.

It is up to the National Bureau of Economic Research to declare whether or not the US economy is in a recession, and while no such declaration has yet been made, Jones and Druckenmiller’s view is that the current tightening environment makes a recession inevitable in the next few few. months.

Jones pointed out i interview that unemployment is currently at a relatively low 3.6% in the US In order for the Fed to swing, he argued, the unemployment figures must be higher. If he is right, it suggests that crypto could benefit from rising unemployment since the market has been dependent on the Fed’s moves throughout this year.

Jones and Druckenmiller’s bullish crypto thesis effectively stems from the idea that Bitcoin can act as a hedge against inflation. Jones specifically name-dropped Bitcoin and Ethereum as potential benefactors of fiat currency erosion, pointing to their scarce properties. Bitcoin’s fixed supply of 21 million is treated with near-religious fervor by certain corners of the crypto community, while Ethereum has become occasionally deflationary since it completed the “merger” into Proof-of-Stake.

While the Fed’s aggressive approach to fighting inflation has hurt markets this year, things could change if the central bank changes its tune. According to Jones, crypto will be ready to take the spotlight when the tide turns—but there is a looming recession to get through first.

Disclosure: At the time of writing, the author of this piece owned ETH, USDT, and several other cryptocurrencies.