Biden ‘Confirms’ Fed ‘Shock Therapy’ – Why $1 Trillion Bitcoin, Ethereum, and Crypto Price Drop Could Be Just Beginning

bitcoin
BTC
and crypto prices have been hit by a massive sell-off this month, wiping nearly $1 trillion from the crypto market since the beginning of April – yet Elon Musk has surprised some by announcing his continued support.

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Bitcoin price has dropped to lows not seen since the pandemic crypto rally that began in late 2020, with a perfect storm of Federal Reserve interest rate hikes, a massive $9 trillion balance sheet shrinking, and a massive $18 billion stablecoin meltdown. cryptocurrency luna is staging a shock splash this weekend).

Now, a widely respected analyst has warned the Federal Reserve, which has been “approved” by US president Joe Biden, that it will follow a program of “shock therapy” to curb demand and “kill” inflation – the crypto crash is simply an “unexpected bonus.”

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“Volatility is like napalm for risk assets,” Zoltan Pozsar, global head of short-term interest rate strategy at Credit Suisse, wrote in a widely shared social media note this week.

“At least consider that the extreme volatility and lack of liquidity you see in the markets is by design and the Fed will not be deterred by it, but rather encouraged by it in its pursuit of price stability. An asset price correction is a desired outcome of increases and a massive slowdown in growth is required to bring down inflation, the curved Fed. The more he reverses ‘, the harder it will be to push him back.”

Data this week showed US consumer prices rose 8.3% year-on-year in April, beating expectations and stubbornly staying at a four-year high.

Earlier this month, the Fed increased rates by half a point – the biggest rate hike in 22 years. Since then, Fed chair Jerome Powell, approved for a second four-year term this week, has signaled that more rate hikes of a similar size are on the way, and that the Fed will begin to shrink its $9 trillion balance sheet. pandemic period.

“I agree with what Powell said last week, the number one threat [to] The force we’re building is inflation,” Pozsar said in comments interpreted by Pozsar as meaning that Biden “declared the end of the Fed idol and endorsed the Fed’s call to lower inflation.”

“The message is pretty clear,” Pozsar wrote. “Quantitative easing has exceeded welcome; we need a host of negative wealth effects; we need ‘shock therapy.’ Crypto sales are just an unexpected bonus.”

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Aside from a brutal cryptocurrency crash that wiped out the gains of bitcoin and ethereum last year, the S&P 500 is now down more than 16% since the start of 2022 and the tech-heavy Nasdaq 100 is down 25%. The Dow has lost 12% since January.

“The Fed is now in the business of writing a call option on risky assets, not just stocks, but housing and crypto,” Pozsar wrote.

For some, the crypto crash has eclipsed stock market sales with anticipated volatility for the “foreseeable future”.

“True story…

“There is a lot of talk about the ascending regulation of the field, but it is too late for losers who can’t afford to lose. Market volatility is expected to continue for the foreseeable future and it’s hard not to shake the knees move but history teaches that up follows down and sometimes the right move is not to move. “

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