The bears continue to dominate sentiment, with more downside possible amid inflation and geopolitical worries.
Dan Morehead says that if interest rates rise, equities and real estate will become less attractive, leaving blockchain assets as the best store of value.
Pantera Capital CEO Dan Morehead says cryptocurrencies remain the “best place” for investors seeking to preserve wealth if Federal Reserve rate hikes dim the appeal of stocks.
In a newsletter published Wednesday, the Pantera leader pointed to market concern over the Fed’s potential path as it prepares to raise interest rates in response to runaway inflation.
Last week’s data showed the US consumer price index climbed 7.5% year-over-year, and the Fed’s meeting minutes this week signaled rate increases are coming. While markets may be pricing in increases in March, uncertainty over how aggressive the central bank will be could spook many investors.
Higher rates make stocks and real estate ‘less attractive’
Falling equity markets are likely to drag on Bitcoin and other crypto assets, as seen this week amid tensions between Russia and Ukraine. Correlated trading has led analysts and economists to predict deeper declines for crypto if stocks begin to tumble sharply.
But Morehead believes digital assets would hold up better than many expect if that negative scenario unfolds. He says the market will quickly bifurcate, leaving investors to decide which assets offer the best store of value.
“Higher interest rates will make equities and real estate less attractive. So where does one invest when stocks and bonds fall?” he wrote, quoted by Cointelegraph.
In his view, blockchain and digital assets like Bitcoin provide “a legitimately viable place to invest.”
Crypto sell-off driven in part by tax considerations
Addressing the selling pressure that has pushed the crypto market lower since late last year, the Pantera chief highlighted the role of tax-related selling as a potentially significant side effect.
He noted some downward pressure came from “undesirable tax positions” held by investors after the bumper year in 2021.
“There was $1.4 trillion in crypto capital gains realized last year,” he wrote, adding that this alone could explain much of the sell-off seen since last year’s peak for Bitcoin and other crypto assets.
Bitcoin is trading near $40,400, down roughly 5% in the past 24 hours as crypto follows declines in equity markets. The S&P 500 closed 2.12% lower on Thursday, while the Dow fell more than 600 points.