Recession can be good for cryptocurrencies: Bank of America

Bank of America warns of an impending “recession shock” as the Federal Reserve tightens monetary policy to combat rising inflation in a weekly research note. Cash, commodities, and cryptocurrency may benefit from the shock.

According to Reuters, Bank of America strategists cautioned in a weekly research note that the macroeconomic outlook is rapidly deteriorating and that tightening monetary policy by the Federal Reserve might force the US economy into recession. “Inflation shock” is getting worse, “rates shock” is just getting started, and a “recession shock” is on the way, according to Bank of America chief investment strategist Michael Hartnett in a note to investors.

“In this scenario, cash, volatility, commodities, and crypto currencies, such as bitcoin (BTC) and ether (ETH), could outperform bonds and stocks,” the chief investment strategist noted. The Federal Reserve announced on Wednesday, April 6, that it will likely begin removing various assets from its $9 trillion balance sheet. The Fed’s upcoming meeting in early May will kick off this process.

Moreover, unlike prior “quantitative tightening” exercises, this one will be carried out at about twice the rate at which the Fed fights inflation, at rates not seen since the early 1980s. Many investors, according to Bank of America, expect the central bank to raise its benchmark interest rate by 50 basis points, which is twice as much as expected and signalled previously.

In terms of notable weekly flows, Bank of America said that emerging market equity funds received $5.3 billion in the week of April 4, the biggest in ten weeks, while emerging market debt vehicles got $2.2 billion, their strongest week since September 2021.

It’s a wrap for this story.

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