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- Tom Lee says that as interest rates spike, bucking a 30-year trend, investors will be seeking to invest in riskier assets as they lose money investing in government bonds.
- Crypto will be one of the biggest beneficiaries, with $60 trillion of the $142 trillion U.S household net worth seeking a new home, but there’s one big risk to the crypto rise.
Bitcoin has staged a comeback in the past day to gain 4 percent and trade at $43,600 as the entire crypto market saw green. And according to one analyst, the price could be heading for the $200,000 mark in the next few years as it stands to gain from the hike in interest rates. Tom Lee stated in an interview that he expects $60 trillion from the American households to be seeking riskier investment assets like Bitcoin as government bonds lose their appeal over interest rate hikes.
BTC’s trading volume is up 38 percent to hit $22.8 billion after a lackluster Valentine’s Day trading session. Its market cap now stands at $826.6 billion, placing it just below Tesla and almost twice the market cap of America’s largest bank, JPMorgan Chase.
(Chart showing the price, relative volatility and the simple moving average for BTC, courtesy of TradingView.com).
Despite being 36 percent below its all-time high, Bitcoin still has a bright future ahead, Lee believes. The analyst, who is the founder and head of research for Fundstrat Global Advisors, believes that the U.S Federal Reserve holds the key to BTC’s future, with its decision to hike interest rates being the most impactful in recent years for BTC.
In an interview with CNBC, Lee pointed out:
Interest rates look like they’re set to reverse almost 30 years of declines. That means for the next 10 years, you’re guaranteed to lose money owning bonds… that’s almost $60 trillion of the $142 trillion [of U.S. household net worth].
Lee: Bitcoin still the crypto to watch, but it has one huge risk
Lee has never shied off from making bold Bitcoin price predictions. While some haven’t panned out, one which he made five years ago, back when the crypto was only gaining mainstream appeal, has held. Back then, he predicted that BTC would be trading between $15,000 and $50,000 in 2022.
Today, the crypto is trading close to the upper bound of Lee’s prediction.
On the trickling down of money from bonds to crypto, Lee told CNBC:
The question we ask ourselves is, ‘where’s the $60 trillion going to go to earn yield?’ The obvious thing is it rotates into stocks like FAANG, but I think what is more likely is a lot of speculative capital from equities… it’s really going to be tracing its roots to a rotation out of bonds and it’s going to eventually flow into crypto.
In recent times, alternative coins. or altcoins, have taken a chunk out of BTC’s market appeal. Even institutional investors have continued to flow into Ethereum and other newer altcoins like Cardano, Solana and Terra.
Read More: Institutional investors are fleeing Bitcoin for altcoins, report reveals
However, BTC is still the crypto to watch, Lee pointed out. Investors want the assurance that comes only with Bitcoin, and the analyst doesn’t see this changing in a long time.
Bitcoin does have one big risk, however. According to Lee, while it’s okay to experiment and even fail with NFTs, altcoins, DeFi, the metaverse and more, it’s critical to maintain the security of Bitcoin. If this security ever comes into question, it would be devastating not only for Bitcoin, but for the entire market as well.
Will Bitcoin hit $100,000 this year? Lee says that it’s possible, but predicting the price of Bitcoin at this point is a fool’s errand.
Unless someone really has a crystal ball, it’s very difficult to be precise in crypto. Drawdowns of 40% are really common and bitcoin makes most of its gains in 10 days in any single year. It’s tough to be too precise with crypto. It’s wide lanes.
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