Bitcoin and other cryptocurrencies could outperform bonds and stocks amid a potential recession, noted BofA chief investment strategist Michael Hartnett. In a recent note, he argued that the new US Federal Reserve policy could push the country and most of the world into such an economic state.

Crypto Will Flourish Amid Next Recession?

After years of trying to combat the consequences of the COVID-19 pandemic by bolstering the expansion of its balance sheet, which is now around 9 trillion dollarsthe US central bank changed its tune at the start of 2022. This means that after having more than doubled its balance sheet since March 2020, the Fed has decided to start reducing it, with some reports suggest that it could soon lose up to $95 billion in assets per month.

Quoting a note from Bank of America strategists, Reuters reported that “the macro-economic situation is rapidly deteriorating” and could lead to a recession for the world’s largest economy.

Using strong words like “worsening inflationary shock, rate shock just beginning, recession shock coming,” Hartnett warned banking clients that most assets will experience massive volatility. Yet some, like bonds and stocks, will underperform others.

In fact, the bank has backed several horses to gain the upper hand amid the potential recession – cash, commodities and, interestingly, cryptocurrencies.

Bank of America building. Source: Financial Express

How is crypto made?

For those who follow the crypto industry and Wall Street’s general approach to it, seeing BofA picking digital assets as the potential top performers might be quite surprising. In fact, not too long ago, BofA, along with countless other banking organizations, took frequent hits against bitcoin and the entire field.

We won’t mention core name changes like JPMorgan, Goldman Sachs and Citigroup. Let’s focus on the Bank of America.

After years of ignoring the asset class, BofA asserted in March 2021 that bitcoin is highly volatile, making it “impractical as a store of wealth or a payment mechanism.”

But then came the summer of 2021, and reports surfaced that the bank had set up a cryptocurrency research team. The tone-shifting feelings intensified a few days later when news broke that BofA had launched a Bitcoin futures trading service.

The bank’s turnaround solidified in October of the same year (six months after the bitcoin bashing). In another paper at the time focused on digital assets, BofA researchers called BTC “significant” and called the entire industry “too big to ignore.”

Since then, the bank has even praised other networks and their respective native coins, such as Solana and Chainlink.


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