David Kelly, JPMorgan Asset Management chief global strategist, has predicted that cryptocurrency market investors will face “massive losses” in an interview with Business Insider:
At some stage, I expect to see massive losses in crypto, because there is nothing there.
Kelly sees the U.S. Federal Reserve’s upcoming interest rate hikes as the main bearish catalyst for the cryptocurrency market.
A hawkish Fed will put an end to the speculative mania that kicked into high gear in 2021, according to the analyst.
He believes that the central bank could potentially catch investors off guard by hiking interest rates more decisively than anticipated.
The popular inflation yardstick made many analysts believe that the Fed would ramp up its hawkishness.
Due to rising interest rates, money will flow into projects with “real economic return” instead of “crazy ideas,” according to Kelly:
If you push real interest rates up to a positive level, you will starve the crazy ideas of cash and funnel money towards projects that actually have a positive, real economic return.
The Fed’s accommodative monetary policy was widely viewed as the key reason behind the recent cryptocurrency rally.
Bitcoin and Ethereum, the two top cryptocurrencies, are down 36.75% and 36.94%, respectively, from their record highs that were achieved in early November.