Can crypto surge in the face of rising inflation?

With inflation rising with rapidity most assets are going the other way in price. Is it just gold that can be the safe hedge in this treacherous environment, or could crypto also be that hedge. Bank of America strategists think this could be the case.

In a recent Reuters article, Bank of America warned that a “recession shock” was on the way. With a fast deteriorating macro situation, the bank warned that this could be enough to tip the American economy into recession.

BofA chief investment strategist Michael Hartnett warned of “inflation shock” worsening, a “rates shock” that was only just beginning, and of a “recession shock” that was on the way. However, he thought that what could outperform stocks and bonds in this environment was cash, commodities, and crypto.

The Federal Reserve is very keen to put a stop to inflation, so many analysts are forecasting 50 base points rises, potentially at each of the FOMC meetings this year. Also, the Fed has signalled that it will start reducing its $9 trillion balance sheet as early as May, and at a faster rate than many had expected.

Against this backdrop, BofA strategists believe that the fast changing macroeconomic landscape is one where crypto could thrive, and that this sector could see price rises in the months to come.

There still appears to be some confusion in markets as to whether crypto is a growth stock or not. Over recent weeks Bitcoin has seemed to follow the general decline in tech stocks, but given the very special properties of Bitcoin as a store of value with a scarce and known supply, it could very well come into its own as other major assets crash.

From a technical analysis perspective bitcoin does rather look on the weak side, at least for the short term over the next few weeks. Bitcoin is still in its downtrend from the all-time-high of just under $69,000 set at the beginning of November last year.

A bear flag has formed, and should bitcoin drop through the bottom then the $29k to $30k support might be waiting. Beyond that a possible wick lower might also be on the cards. However, given the strength of the asset over the long term, some very strong buying would very likely come into play at these levels.

Looking at the end of this year, and into next, bitcoin looks an incredibly good proposition indeed. In addition, the rest of the crypto market should probably follow suit, and an explosion in the sector could certainly take place.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.