The bitcoin price has dropped under $17,000 per bitcoin, its lowest since late 2020, sparking serious fears about major exchanges. The ethereum price has also crashed, with around $2 trillion in value wiped from the combined crypto market in just 12 months.
Now, amid a fresh crypto exchange panic, BlackRock
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“Recession is foretold as central banks race to try to tame inflation. It’s the opposite of past recessions,” strategists at the around $8 trillion in asset manager wrote in a 2023 global outlook report. “Central bankers won’t ride to the rescue when growth slows in this new regime, contrary to what investors have come to expect. Equity valuations don’t yet reflect the damage ahead.”
The huge bitcoin, ethereum and crypto price rally over the last two years came alongside a stock market bull run that pushed company valuations to never-before-seen highs as the Federal Reserve flooded the market with cash.
This year, as the Fed battles to bring soaring inflation under control with a series of tough interest rate hikes that have pushed the economy to the brink of recession, prices have fallen back across the board with crypto prices mirroring a crash in high-growth technology stocks.
“We don’t think equities are fully priced for recession,” BlackRock’s team, led by vice chairman Philipp Hildebrand, wrote. “Corporate earnings expectations have yet to fully reflect even a modest recession. This keeps us tactically underweight developed market equities.”
In November, Federal Reserve officials warned the chances of a 2o23 U.S. recession had risen to almost 50% due to slower consumer spending, global economic risks and further interest-rate hikes.
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This week, the Fed hiked interest rates by a further 50 basis points following four consecutive 75 basis point hikes and promised it would continue to raise rates into 2023 if necessary to rein in inflation.
BlackRock analysts went on to warn the strategy of ‘buying the dip’ won’t work in this new economic environment.
“What worked in the past won’t work now,” the strategists said. “The old playbook of simply ‘buying the dip’ doesn’t apply in this regime of sharper trade-offs and greater macro volatility. We don’t see a return to conditions that will sustain a joint bull market in stocks and bonds of the kind we experienced in the prior decade.”