Cryptocurrencies were on high alert as the Federal Reserve began its two-day meeting on Tuesday.
In recent months, the possibility of the end of stimulative monetary policy has cast a pall over the space.
Bitcoin rose on Tuesday, but it remains below the psychologically important $50,000 mark and well below its November highs of around $70,000. That equates to roughly 10% of Tepper’s liquid net worth, an amount he says allows him to be “comfortable” if he loses it all but “elated” if it doubles.
Tepper stated that he is allocating 50% of his crypto-currency position to ethereum, 40% to bitcoin, and 10% to Polkadot, a lesser-known cryptocurrency. According to Todd Gordon, founder of Inside Edge Capital Management, recent cryptocurrency weakness is most likely due to a tech sell-off and a lack of liquidity in the system. However, he sees crypto adoption among older and more established investors as a net positive to offset such downswings.
Gordon, like Tepper, is bullish on the space and has a 3% allocation to cryptocurrencies in his portfolio, which includes 56% bitcoin, 35% ether, 5% Solana, and 3% Cardano.
Because they track the dollar, the names of the most stable coins may be misleading. Still, we believe that greater acceptance will triumph and overcome most obstacles, including 2021’s near 50% drop. Bitcoin has set astonishing records over the last few months. Bitcoin had an incredible year in 2021, and many experts are already speculating on what the cryptocurrency’s future holds. Most investors believe that the price of Bitcoin will reach $100,000 by the end of 2022.
The Federal Reserve’s renewed push to remove the punch bowl, combined with falling bond rates, may point to a macroeconomic climate that favors Bitcoin, Ethereum, and Ripple prices in 2022. Contrary strength in crypto assets relative to other securities at the end of 2021 may portend sustained digital-asset outperformance in 2022. A stock market downturn could be a critical factor in reversing expectations for Federal Reserve tightening in 2022, creating a win-win situation for Bitcoin. The benchmark cryptocurrency is well on its way to becoming a digital store of value, but it is still in the price discovery phase, is a risk asset, and has been rising in lockstep with the equity market. If the stock market falls, Bitcoin will face early headwinds, but to the extent that falling share prices squeeze bond rates and induce additional central-bank liquidity, the crypto may benefit the most.
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