A popular crypto analyst is making a macroeconomic forecast to see what the future might hold for risk-on assets like Bitcoin.
In a new strategy session, the pseudonymous host of Coin Bureau known as Guy notes that periods of high inflation have historically lasted roughly three years, which could give hints as to when the financial landscape could change.
“It’s anyone’s guess as to when inflation will come down, but history suggests that periods of high inflation last for about two to three years at a time, at least in the United States.
Not surprisingly, this is consistent with the length of Fed interest rate cycles, which likewise last for two to three years at a time…
“The scary thing is that what has historically brought down inflation wasn’t the Fed’s rate hikes, but rather the recessions these rate hikes caused.
As the saying goes, history doesn’t repeat but it does rhyme. That means we’re likely to see a similar economic downturn in the coming months.”
Due to geopolitical conflicts in Eastern Europe, Guy speculates localized production will keep prices high for consumers, and risk-on assets like cryptocurrencies could be hurt by this reshaped landscape in the short term but will remain strong in the long term.
“The world appears to be in the process of deglobalizing, meaning that more and more production will happen at home, or at least closer to home. The consensus seems to be that this will cause the prices of certain goods and services to stay high indefinitely.
If you’re wondering where crypto fits into all of this, the answer is that it doesn’t. BTC has proven itself to be an inflation hedge in the long term, but it’s not going to be of much help in the short term while the Fed’s rate hikes are causing investors to cash out of risk-on assets to pay back debts.”
The analyst says that while most asset classes will stagnate during a recession, he does believe that in the long term, stocks, cryptocurrencies, and maybe commodities will reward investors in weathering the effects of inflation.
“It’s also unclear how crypto will handle a recession, but given crypto’s high correlation with tech stocks, it’s reasonable to assume that it probably won’t be pretty.
The silver lining to this situation is that the Fed will inevitably reverse course, as it always does. This will eventually cause stocks, cryptocurrencies and potentially commodities to rally, fulfilling their roles as long-term inflation hedges.”
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