Hedge Fund Reports Bitcoin Is Still Considered Inexpensive Now• February 24, 2022 3:31 pm • Comments
Pantera Capital recently released a report that analyzes the overall macroeconomic conditions when it comes to the debt market, the crypto market, and the Fed’s recent actions in monetary policy.
Since the start of the pandemic, the Fed has been printing trillions of dollars into the global economy which have driven traditional financial markets to all time highs.
However, there are now some warning signs that this cannot go on forever such as the fact that the yields for US Treasury Bonds are now starting to increase rapidly.
According to Pantera Capital, Bitcoin looks cheap at the current levels and the firm believes blockchain could be the best relative asset class in an environment where interest rates are expected to rise. https://t.co/xlLOn9CG5V
— Cointelegraph (@Cointelegraph) February 23, 2022
“Since November yields have been rising dramatically — bond investors begun to realize that w/ inflation at 40-year highs, they are sitting in contracts programmed to decline in purchasing power.”This development marks a first for the U.S. debt markets as noted in the February letter to investors released by Pantera Capital, which stated “there has never been a time in history with year-over-year inflation at 7.5% and Fed funds at ZERO.”
Matters get even worse when looking at real rates, or the interest rate one gest after inflation, which Panteral Capital indicated is “at negative 5.52%, a 50-year low.”
Pantera Capital said,
“The Fed’s manipulation of the U.S. Treasury and mortgage bond market is so extreme that is it now $15 TRILLION overvalued (relative to the 50-year average real rate).”
The hedge fund has observed that the recent decline in the crypto market is due to the fact that many still see it as a market that is correlated with traditional markets.
With that being said, the important distinction is that the firm reports that this correlation will most likely not last forever.
Crypto tends to only be correlated with the traditional financial markets for an initial period such as an estimated 70 days, but a break in the correlation could be the catalyst for a major bull run for cryptocurrencies as investors start to see them as completely separate assets.
Additionally, the rising rates may actually be a positive thing for Bitcoin and other prominent digital assets.
— Newblock (@Newblock_news) February 24, 2022
Despite the weakness seen in BTC since the start of the interest rate hike talks, the situation could soon improve according to Pantera Capital, which warned that “10-year interest rates will triple – from 1 .34% to something like 4-5%.”
Based on the well-known saying “to be scared when others are greedy and greedy when others are scared,” now could be an opportune time to accumulate BTC as its “four-year yield is at the lowest of its historical range” according to Dan Morehead, CEO of Pantera Capital, who job the following chart suggesting that Bitcoin “looks cheap” and “doesn’t look overvalued”.
“Once people do have a little bit of time to think this through, they’re going to realize that if you look at all the different asset classes, blockchain is the best relative asset class in a rising rate environment.”
As of right now, the overall crypto market has a total capitalization of around $1.7 trillion.
— CryptoNewsOn (@Crypto_News_On) February 24, 2022
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