- The collapse of FTX shows that Fed tightening is crushing speculative assets, UBS said on Tuesday.
- The bank’s CIO said aggressive rate hikes have injected “vulnerabilities” into cryptocurrencies.
- Mark Höfele warned of the possibility of the Fed stopping rate hikes: “It’s too early to assume a change in Fed policy.”
The collapse of crypto exchange FTX shows that the Federal Reserve rate hike is hurting cryptocurrencies, UBS says investors expect central bank to back off policy soon You shouldn’t.
The Fed’s aggressive tightening campaign is putting pressure on speculative assets such as: Bitcointhe Swiss bank’s chief investment officer wrote in a research note on Tuesday.
“The failure of cryptocurrency exchange FTX is due to company-specific factors, but highlights the threat to speculative assets at a time of declining global liquidity,” said Mark Häfele.
The Federal Reserve (Fed) has raised interest rates by a whopping 75 basis points in its fourth consecutive meeting. Inflation slows to 7.7% in October.
The tightening campaign has hit cryptocurrencies and other risky assets hard.
Bitcoin fell to a two-year low of $16,000 on Friday FTX files for bankruptcy, says CEO Sam Bankman-Fried will resignThis means that the top cryptocurrency by market value has lost 64% of its value in 2022.
Hefele said investors should treat the unregulated crypto space with great caution.
“Recent developments underscore our longstanding belief that crypto is a highly risky investment proposition given potential assets operate with limited transparency or regulatory scrutiny. I support the view,” he said.
“Decreased central bank liquidity has increased the vulnerability of this market.”
Häfele also dismissed the notion that the Fed is about to start easing its tightening campaign, even as investors’ optimism about weaker-than-expected inflation in October set the bar. S&P 500 Last week it was up 5.9%.
“I think it’s too early to assume a change in Fed policy,” he said.
These statements suggest the central bank will continue to take a tough stance on inflation rather than pivot to support economic growth, equities and cryptocurrencies, Hefele said.