YEREVAN (CoinChapter.com) – Jamie Dimon, the chief executive of financial giant JPMorgan Chase said he is preparing his bank for an “economic hurricane” and suggested investors do the same. He also asserted that JPMorgan would take the “conservative” route with its balance sheet in turbulent times.
JPMorgan says a storm is underway.
Dimon mentioned several aspects of quantitative easing programs “backfired,” including negative rates. However, the upcoming “hurricane’s” primary focus was the war in Ukraine and the related spikes in oil prices.
Wars go bad, [they] go south in unintended consequences. […]We’re not taking the proper actions to protect Europe from what’s going to happen to oil in the short run […] as oil prices could potentially hit $150 or $175 a barrel.
Moreover, Dimon’s warning comes on the back of the Federal Reserve implementing its quantitative tightening (QT) policy to fight the growing inflation. Supply chain disruptions due to the pandemic exacerbated the price increases and the worries that the Fed might tip the economy into recession as it combats inflation.
We’ve never had QT like this, so you’re looking at something you could be writing history books on for 50 years.
However, the economic “hurricane” might also devastate the crypto market. In detail, in times of uncertainty, investors tend to take the conservative route, as JPMorgan stated. Thus, the stock market suffers losses in a risky asset class while traders flock to sanctuary assets or the strengthening greenback.
Bitcoin has been displaying a strong correlation with risk-on assets. So if the storm hits the equity market, it is likely to rage through the digital assets as well, starting with BTC. In the meantime, the alpha crypto traded at just over $30,200 on June 2.
Bitcoin (BTC) correlation with S&P500 (SPX). Source: TradingView.com
Moreover, reversing the Fed’s money printer could drive Bitcoin further into the bear market. The Fed plans to shrink its balance sheet by $47.5 billion per month for the current quarter. Additionally, investors should see a $95 billion reduction in September and a total $7.6 trillion cut by the end of 2023.
Digital asset newsletter author under the pseudonym CryptoWhale also commented on QT’s effects on Bitcoin. In early May, the analyst forecasted a BTC “mega crash” if the Fed implemented the planned QT rate.
Bitcoin has never once in its history been in a bull market while the Federal Reserve did quantitative tightening.
Smart whales spent the last 12+ months dumping their bags on dumb retail.
The future fluctuations of volatile assets like Bitcoin are hard to foresee. However, the “hurricane” Jamie Dimon referred to might have rippling repercussions across the broader economy. Thus, it could also hit Bitcoin as well, trickling down to the altcoin market.
Lilit is a Yerevan-based Markets writer, skilled in 3 languages, and interested in writing about the tech world, trading, art, and science. She also has a background in psychology and marketing, which helps deliver the right message to the target audience.
Bitcoin (BTC) investors suffered the largest U.S. dollar-denominated "Realized Loss" in history, according to data provided by Glassnode.
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