As central banks continue to fight inflation unsuccessfully, Stanley Druckenmiller, a billionaire hedge fund manager, notices the potential of cryptocurrencies.
Will cryptocurrencies get saved?
According to billionaire investor Stanley Druckenmiller, cryptocurrencies could make a comeback as people start to doubt their central banks. Given the situation of the global economy and the Fed’s uphill battle against both inflation and recession, the hedge fund manager believes that this outcome is becoming more and more likely.
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Druckenmiller criticizes Fed for its monetary policy in 2021 that caused one of the largest asset bubbles ever seen. He adds that Fed and other central banks ignored inflation last year, and it wasn’t addressed because it simply wasn’t in their duty to do so. After Fed began acting and brought hawkish policy into functioning, cryptocurrencies dropped to their 2020 lows.
The annual inflation peaked at 9.1% and is now slowing down. However, it is projected that it will take several years to return to normal levels at 2%. While Druckenmiller is happy that the Fed is now actively tackling inflation, he doesn’t think they’ll be able to avoid a recession by the end of 2023. As a result, he continues to have doubts about the Fed’s ability to reduce inflation without changing course.
“Let’s see what happens if we get a hard landing,” he said. “You have to slay the dragon. And the chair is right. You’re probably going to have some pain,” he said.
As the Fed continues to tighten, Druckenmiller clarified that he is avoiding assets, including Bitcoin and other cryptocurrencies. He sees a long-term case for cryptocurrency to increase if central banks start to change their tune, much like the Bank of England recently started to. But this is going to take some time.
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The number of people adopting cryptocurrencies rises every year, and it is a matter of time until another bull run starts, which we explore here. But as crypto is still highly correlated with the stock market, it will probably continue downward for some time. So the inflation needs to be tamed first, then assets can enter a new uptrend.
“I don’t own Bitcoin. It’s tough for me to own anything like that with central banks tightening. I still think if things get really bad, we could see cryptocurrency having a big role in a renaissance because people just aren’t going to trust the central banks,” he added.
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