“Fed sledgehammer” will cause a crash worse than 2008, but Bitcoin, Ethereum will reach new all-time highs by 2025
(Kitco News) – The ‘Fed sledgehammer’ of rising interest rates will lead to a market crash worse than 2008, but Bitcoin and Ethereum will recover to all-time highs, said Mike McGlone, senior commodities strategist at Bloomberg Intelligence.
“I think it’s going to be worse than the 2008 correction, worse than the Great Financial Crisis,” McGlone said. “The Fed started easing in 2007, and then they added massive liquidity. They can’t do that anymore.”
However, McGlone added that Bitcoin and Ethereum would reach new highs as adoption increases, but only after facing a significant correction.
“Cryptos are the fastest horse in this race,” he explained. “As they look into the future, they will continue to appreciate it, but for now … everything is going down.”
McGlone spoke with Michelle Makori, Editor-in-Chief and Lead Anchor of Kitco News.
Fed Policy and Inflation
In response to high inflation, the Federal Reserve increased its key interest rate by 225 basis points during the year. The August inflation rate was 8.3 percent, higher than markets had priced in, which McGlone blamed on the Fed’s previously loose monetary policy.
“[The Fed] now know that they are somewhat responsible for this massive inflation,” he said. “The Fed is not going to ease any time soon… Markets have to go down.”
McGlone explained that the Fed injected “too much liquidity into the market” in response to COVID-19, causing risk assets to rise.
“The Fed is not going to ease any time soon, and … now we have the benefit of knowing the mistakes they made by easing too much,” he said. “The risk asset pendulum swung too far to the side.”
Cryptocurrencies
The recent Ethereum merger was highly anticipated, but Ether, Ethereum’s native currency, fell 4.3 percent on the first day of trading after The Merge.
“I’m afraid [The Merge] got too hyped, McGlone said.[The price of Ether] could go to $1,000, or even go a little lower.”
Over the next 5 to 10 years, McGlone predicted that Ether and Bitcoin would “go much higher,” but that like all risk assets, “The Fed sledgehammer” would continue to hurt its value.
McGlone previously called for a $100,000 price for Bitcoin by 2025, and told Makori that he stands by his call.
“It’s a matter of time before it gets to $100,000,” he confirmed. “With code, the supply goes down, you can’t change it. Adoption and demand is increasing … I think it’s going to accelerate.”
To find out McGlone’s price outlook for Ethereum and gold, watch the video above.
Follow Michelle Makori on Twitter: @MichelleMakori
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