Fed Biden’s ‘Shock Therapy’ – Why The Trillion Dollar Price Crash of Bitcoin, Ethereum, and Crypto Could Just Begin

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Cryptocurrency prices have been hit by a strong sell-off this month, eliminating nearly $1 trillion from the cryptocurrency market since early April – although Elon Musk surprised some by noting his continued support.

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Bitcoin’s price has plunged to its lowest level since the crypto-pandemic rally began in late 2020 after a perfect storm of Fed interest rate hikes, its massive $9 trillion balance sheet shrink and the $18 billion stablecoin crash (with the crash) cryptocurrency luna making a recovery shocking this weekend).

Now, a widely respected analyst has warned that the Federal Reserve, “endorsed by” US President Joe Biden, will pursue a “shock therapy” program in order to reduce demand and “eliminate” inflation – with the collapse of cryptocurrencies only an “unexpected bonus”.

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

“Consider at least the possibility that the extreme volatility and lack of liquidity you see in the markets is intentional, and will not deter the Fed by it, but rather encourage it in its unilateral pursuit of price stability. If an asset price correction is the desired outcome of the rally, a significant slowdown in Growth is necessary to kill inflation, and the more the curve is flipped onto the Fed, the more difficult it will be to push it against it.”

Data this week showed US consumer prices rose at an annualized pace of 8.3% in April, beating expectations and remaining stubbornly at a four-decade high.

Earlier this month, the Federal Reserve raised interest rates by half a percentage point – the largest rate increase in 22 years. Since then, Federal Reserve Chairman Jerome Powell, confirmed this week for a second four-year term, has signaled that more similar-sized price increases are on the way while also starting to wind down its $9 trillion balance sheet that has ballooned during the pandemic. era.

“I agree with what Powell said last week that threat number one,” he added [to] President Biden said this week in comments that Bozar interpreted to mean the strength we’re building is inflation.”

“The message is crystal clear,” Bozar wrote. “Quantitative easing has gone beyond its welcome; we need a round of negative wealth effects; we need “shock therapy.” The Fed, on a singular mission to kill inflation, will not content itself with pursuing tighter financial conditions until yields turn higher, and stocks fall further And housing is shifting too. Selling cryptocurrencies is just an unexpected bonus.”

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In addition to the brutal crash of cryptocurrencies that wiped out the gains of Bitcoin and Ethereum over the past year, the S&P 500 is currently down more than 16% since the start of 2022 and the high-tech Nasdaq 100 is down 25%. The Dow Jones index lost 12%.

“The Fed is now working on writing a put option on risky assets — not just stocks, but housing and cryptocurrencies as well,” Pozsar wrote.

For some, the cryptocurrency crash has overshadowed the sell-off in the stock market.

“The real story… has to be the trajectory of cryptocurrency,” Danny Hewson, an analyst at London-based brokerage AJ Bell, wrote in an email comment.

“There is a lot of talk about increased regulation of space, but for those who have lost what they cannot afford to lose, they are falling behind. Market volatility is expected to remain for the foreseeable future, and it is hard not to cause a knee jerk to move but history teaches us that follow through follows and sometimes The right movement is not to move.”

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