Bloomberg Analyst: Bitcoin Could Outperform Stocks in 2022 With Fed Tightening

The value of bitcoin fell sharply on Wednesday after the minutes of the FOMC meeting showed that the Federal Reserve plans to step up efforts to curb inflation in 2022.

But Bloomberg commodities strategist Mike McGlone believes that Bitcoin still has a good chance of getting ahead as investors recognize its value as a crypto reserve asset.

Bloomberg commodities strategist Mike McGlone said the Federal Reserve’s signal of tightening monetary policy in 2022 could have short-term headwinds for risky assets such as stocks and cryptocurrencies, but as investors recognize Bitcoin (BTC) as a cryptocurrency The value of reserve assets, Bitcoin still has a great chance to succeed.

The January edition of Bloomberg’s Crypto Outlook stated that the Federal Reserve’s plan to raise interest rates in 2022 could provide “a win-win situation for Bitcoin and the stock market.” The reason is that the S&P 500 is currently the most overextended above its 60-month moving average in more than 20 years, and Bitcoin is seeing increasing mainstream appeal as an inflation hedge.

“Tight markets are already common, but commodities and bitcoin seem to be the leaders of the early comeback,” McGlone said. “It’s a question of the duration of the bull market, and we think Bitcoin will go ahead.”

Minutes of the Fed's December policy meeting showed that Fed officials are preparing to move ahead with aggressive measures to curb inflation faster than previously expected. At least the current plan includes raising interest rates three times in 2022, while reducing the Fed's balance sheet, which currently holds nearly $8.3 trillion in Treasuries and mortgage-backed securities.

While a reduction in stimulus is generally seen as negative for risky assets, including stocks and the broad category of cryptocurrencies, McGlone believes Bitcoin is uniquely positioned to outperform in this environment.

“Cryptocurrencies top the list of risky and speculative. If risk goes down, this helps the Fed’s inflation fight. Being a global reserve asset, Bitcoin could be the main beneficiary in this scenario.”

In the broader cryptocurrency market, the Bloomberg analyst said he expects the “enduring trio” — namely bitcoin, ether (ETH) and dollar-pegged stablecoins — to remain dominant throughout the year.

Bitcoin’s value fell sharply on Wednesday following the release of the minutes of the Federal Open Market Committee meeting, according to data from Cointelegraph Markets Pro and TradingView. The flagship cryptocurrency plummeted below $43,000 for the first time since September and is now down 8 percent in the past 24 hours.