As Inflation Is Here to Stay, Bitcoin, Ethereum, and Gold Investors Will Win, But Brace for Volatility – BitMEX

The US Federal Reserve (Fed) wants to reduce inflation with its interest rate increases this year. In the longer term, however, inflation could still remain the winner, with bets on Bitcoin (BTC), Ethereum (ETH) and Gold expected to pay off. But until then, volatility could wash out even the most dedicated crypto holders, crypto exchange BitMEX warned.

Unlike some other observers from the crypto space who don’t seem to believe that the Fed will raise interest rates in any meaningful way, BitMEX said that it believes that the Fed will "react" to rising inflation. She added that this shift in Fed policy will have a "significant impact" on both the level of inflation and general conditions in financial markets.

"The Fed needs to react now and will do so," the BitMEX research team said, adding that this "is not necessarily a consensus view, at least not among Bitcoiners, gold bugs and those who expects inflation in 2020."

The exchange went on to share a chart that showed how inflation, as measured by the US Consumer Price Index (CPI), has reached its highest point since 1982.

US Consumer Price Index:

In addition, analysts at BitMEX wrote that rising interest rates are expected to have "a significant impact on investor demand for financial assets" and that this includes both stocks and crypto.

“Artificially low interest rates have deprived real, sustainable, profitable and modest companies of economic fuel. Instead, we’re left with loss-making tech startups, Master of the Universe VC funds, meme stocks, CryptoPunks and a Metaverse real estate bonanza."

It added that this represents "an extreme level of financialization in the economy" and that financial assets are generally more sensitive to liquidity conditions and financial flows than any fundamental value.

"Of course, the authorities will respond to the economic downturn and we will eventually correct course back to the inflation regime." The reaction may not be so simple this time, predicted BitMEX, saying that a loose monetary policy could become "less politically palatable "."

"Instead, the answer could be a more targeted and coordinated monetary and fiscal stimulus. The result could be that the next wave of inflation occurs first in consumer prices, and not in financial investments"the team said.

When asked how investors should position themselves for such a scenario, the exchange reiterated that inflation will be the only winner in the end. In this case, inflation hedges such as gold, gold mines, BTC, ETH and index-linked bonds are likely to pay off, BitMEX said. Still, it warned that the scenario "could take five or ten years to play out."In the meantime, things will be volatile, inflation is likely to fall, and very few investors will have the patience and resilience to stick to their plan with all this," the exchange said.

Finally, BitMEX noted that "trying to act tactically and temporally is widely considered stupidity. Instead, the exchange suggested that investors"turn off the machines and sell the index trackers, they have no choice."

"Buy Bitcoin at USD . Play the game"BitMEX concluded.

Learn more:

• Supply disruptions are contributing to inflation, undermining the recovery in Europe

• Demand for high-yield crypto savings products is increasing, BitMEX predicts

• Inflation is’big danger’, as the US government ‘exaggerated it a little’ – Charlie Munger

• How interest rate hikes are slowing inflation – and what could possibly go wrong

• Fiat fears are intensifying, as inflation is going wild in Turkey; Citizens Turn to Bitcoin, Tether

• IMF Warns of Dangers of Fed rate Hike, Brazil Says inflation ‘will not be temporary in the West’