05/18 update below. This post was originally published on May 16
BitcoinBTC, ethereum and cryptocurrencies have rocketed this year, with one high-profile bitcoin investor predicting a “stampede” due to loss of confidence in the U.S. dollar and banking system, partly triggered by the Federal Reserve’s historical series of interest rate hikes.
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The bitcoin price has this month dropped back from recent highs not seen since last summer as a leak revealed a secret Democratic plan for a game-changing U.S. bitcoin and crypto crackdown.
Now, billionaire hedge fund manager Paul Tudor Jones has said he believes the Fed is done with its 12-month run of rate hikes—but warned “the game” of buying bitcoin as an inflation hedge might be over even as bitcoin’s U.S. problem grows.
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“If inflation is truly done a bit, if that story’s been played, then you have to wonder: we were buying gold and bitcoin for the inflation hedges—that game may be over,” Jones told CNBC.
Last week, data showed U.S. consumer inflation fell to its lowest rate in two years following the Fed hiking interest rates ten consecutive times over the last year, pushing them to their highest levels since 2007.
U.S. inflation peaked in June last year at 9.1%—its highest since 1981. However, Fed chair Jerome Powell and other senior officials have been hesitant to declare victory in their war on inflation as higher prices have persisted far beyond their earlier expectations.
05/18 update: Data shows there’s been a surge of investor attention away from bitcoin and toward smaller, newer cryptocurrencies in recent weeks as traders try to maximise profits—something Wall Street giant Morgan Stanley thinks could be a signal the bitcoin price top is in.
“Speculative activity has returned to some parts of the crypto market,” Morgan Stanley
MS analyst Sheena Shah wrote in a note seen by CNBC. “The number of new cryptos created and listed on Uniswap exchange has doubled in the past month, a pattern that, since 2020, has often occurred around market tops.”
At the peak of the bitcoin price bull run in 2021, the bitcoin price had an inverse relationship with the pace of new token listings, according to Shah.
“This tells us that token creators aim to monetize on the recent price-driven speculative demand but that rising token issuance meets a market that soon becomes exhausted,” she added.
Jones, who set the world of bitcoin and cryptocurrency alight when he named bitcoin the “fastest horse to beat inflation” in 2020, said he would continue to hold his “small” amount of bitcoin, adding he’s “never sat on a horse” so long.
“From the beginning, I’ve always said I want to have a small allocation to it because it’s the only thing humans can’t adjust the supply in,” Jones said. “So I’m sticking with it, and I’m going to always stick with it as a small diversification in my portfolio.”
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Meanwhile, Jones warned the increasingly frosty regulatory attitude toward bitcoin is a “real problem” in the U.S. as the “entire regulatory apparatus” aligns against it.
The crypto industry in the U.S. has complained his year that politicians are quietly cracking down on the crypto industry, unofficially forcing it out of the banking system via what’s been branded “operation choke point 2.0.”
The 2022 bitcoin, ethereum and crypto market crash that wiped away $2 trillion of value and plunged many major crypto companies into chaos, has galvanized U.S. regulators and lawmakers to take action on crypto, with the Securities and Exchange Commission (SEC) moving against many of the biggest crypto companies.
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