The current market volatility has made investors and banks skeptical about Bitcoin’s future. Yesterday, JPMorgan reduced its fair value estimation of BTC from $146k to $38k, citing volatility. And now Goldman Sachs says Bitcoin is vulnerable to interest rate hikes in the US despite increased adoption. In fact, this is the main reason why there could be such a big impact as BTC has become correlated with macro assets in the past 2 years.
Goldman Sach’s Bitcoin warning
The interest rates hike is one of the major concerns of the crypto market. In 2020, when the rally began, one of the main reasons was the government announcing trillions of dollars of currency printing which led to high inflation. But now, with the rise of interest rates, the inflation number is expected to fall. This is going to make Bitcoin vulnerable, according to the analysts at Goldman Sachs.
The bank’s co-head, Zach Pandl, also said that the mainstream adoption of Bitcoin could actually cause this. Bitcoin is becoming co-related to other assets and markets, and their fall could also show here. There has recently been a 13% drop in the Top 100 index of Nasdaq. And even the bond yields have been affected. The same has mirrored itself in the crypto markets as Bitcoin suffers the same fate as traditional ones with more than a 50% drop.
A few things to note
Even though we all expect that the authorities will increase interest rates multiple times in 2022, we can also expect that until it happens, the market reaction won’t be too aggressive. This is because, after the latest Fed meetings, the sentiment had grown to be a bit positive when interest rates weren’t hiked. So, things look a little stable for now, but as the March meeting nears, we can expect an increase.
All this doesn’t mean that crypto is going away. No matter the price action, the adoption of Bitcoin is expected to increase in 2022, as per the Crypto.com report. At the same time, even Goldman Sachs’ analyst believes that Metaverse and other blockchain applications could be a big opportunity.
Do you think Bitcoin is really vulnerable to interest rate hikes? And what is your reasoning behind the same? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.