As has been widely documented this year, the Federal Reserve’s six rate hikes are doing nothing to ease the appetite for riskier assets, including bitcoin. In fact, there is no shortage of market observers blaming the Fed for bitcoin’s 2022 downside, as well as for crypto-correlated assets, including .
Fed Hinders Bitcoin Ascent, Says Crypto Expert
Count longtime crypto bull Mike Novogratz among those who say the Fed is an obstacle to short-term bitcoin upside. In a Thursday interview with Bloomberg, he noted that he is dialing back expectations that the largest cryptocurrency will rise to $500,000 in five years, citing Fed tightening.
Novogratz, CEO of Galaxy Digital, said the Fed’s six rate hikes this year are dampening enthusiasm for bitcoin. From today’s level, the largest digital currency would have to rise more than 29 times to reach $500,000, indicating that it is reasonable for Novogratz to back off from his previous forecast.
A significant part of the reason the Fed is pushing bitcoin and other cryptocurrencies can be attributed to the aforementioned interest rate hikes spurring the US dollar to the upside. The greenback will close 2022 as one of the world’s top-performing major currencies, which is a clear move for other currencies, digital and otherwise.
That is, for much of this year, bitcoin’s ties to the dollar have been damaging. Fortunately, data suggests that these correlations are diminishing in recent weeks. That could be an encouraging sign for bitcoin bulls, especially if the Fed holds off on rate hikes in 2023, as some market observers expect will be the case. That would be an obvious help to crypto-correlated exchange-traded funds like the ones you mentioned BLKC.
Encouragingly, some BLKC components have recently shown signs of life, even against the background of FTX implosion, which has far-reaching consequences in the crypto ecosystem. Novogratz acknowledges that the breakdown of FTX and crypto-focused hedge funds and lenders are negatively impacting the crypto universe, but he can use the opportunity to acquire some crypto assets.
“Galaxy Digital is looking at potentially acquiring distressed and cheap crypto assets via ‘some small acquisitions,'” Novogratz said. Galaxy has also reduced its balances on crypto exchanges as a precaution and began looking closely at the exchange’s reserves, he said, after having some of the assets caught on FTX Exchange,” .
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