Antoni Trenchev says the Fed is likely to be less aggressive than anticipated, and “cheap money” will probably continue to flow into cryptocurrencies.
Antoni Trenchev, co-founder of Nexo, expects 2022 to be a challenging year for Bitcoin and the broader cryptocurrency market.
At the same time, he believes that the availability of “easy money” will continue to benefit crypto assets. He points to advantages for digital assets under this scenario and highlights the correlation between cryptocurrency markets and equity markets.
In an interview with CNBC on Monday, Trenchev said that increased investment in the crypto ecosystem is one reason equity markets have been stronger. He added that this trend signals growing adoption, which could be positive for the sector.
Addressing the broader market outlook around upcoming interest rate hikes by the U.S. Federal Reserve, Trenchev commented:
“I was very skeptical about the Fed’s actions and the proposed rate increases and how this would ultimately play out. In my view, cheap money is here to stay, and that is very good for assets like cryptocurrencies.”
The Nexo executive argues the Fed may not act as aggressively as some expect, despite forecasts from Bank of America and other analysts that anticipate seven or more rate hikes in 2022.
He noted expectations that inflation will continue rising, with the consumer price index climbing to 7.2%.
Trenchev told CNBC the last time inflation rose this quickly was in the 1980s, when the Fed raised rates sharply—by about 20% over time. This year, he points to market projections for roughly 3% in the funds rate as an indicator that the U.S. central bank may be less aggressive.
He added that the Fed faces significant challenges managing “the $8 trillion balance sheet that it holds on its books.”
Bitcoin’s price surged in 2020 and 2021 as governments and central banks implemented monetary policies that injected trillions of dollars into economies—much of which found its way into crypto investments. Trenchev believes that outlook could continue to support crypto in 2022.
He also spoke about the metaverse and non-fungible tokens (NFTs), noting that the broader ecosystem has the potential to bring further benefits to cryptocurrencies.