- Stocks and cryptocurrencies have plummeted this year as the Federal Reserve began raising interest rates.
- According to Steven McClurg, CIO of Valkyrie Investments, there is more pain for both asset classes.
- McClurg told Insider that he expects the S&P 500 to drop 30%, which could bring Bitcoin as low as $22,000.
It’s getting harder and harder for crypto bulls to discuss this. bitcoin offers uncorrelated returns to investors.
The two asset classes now appear to be correlated – and both could drop further in the next few months.
It raises interest rates, according to Steven McClurg.
“It’s disappointing, but not unexpected,” said CEO McClurg. Valkyrie Investments, which manages approximately $1 billiontold Insider in a recent interview. “Whenever there is a full market risk trade, the funds always sell their most liquid assets first – in this case, it’s bitcoin and Nasdaq tech stocks.”
McClurg explained why he expects further declines for equities, and he created a scenario where bitcoin could drop below $22,000.
Stock market view
In March, Fed Chairman Jerome Powell announced that the central bank would begin raising interest rates. This hit growth stocks that typically suffer during walking cycles as borrowing becomes more expensive.
McClurg believes the Fed will remain hawkish over the next few months as it tries to curb inflation, which is currently at a 40-year high of 8.3% and GDP at 3.4%.
“Stagflation is not just a risk, it’s a reality,” he said. “And as long as inflation is high, the Fed will continue to raise interest rates.”
“I would expect the S&P 500 to drop another 30% at this point,” McClurg added.
Aim This was one of the most important stock market stories of the week. Shares of the retailer fell as much as 27% Wednesday after the company reported lower-than-expected profits – and Dow Jones dropped 1,100 points the same day.
McClurg said this could be a sign that the stock market is poised for more carnage.
“Target may be a harbinger of things to come – the pain isn’t over yet,” he told Insider.
From Bitcoin to $22,000
According to McClurg, the shift of major indices will likely have a knock-on effect on bitcoin price. He believes the token will bottom around $25,000 and could drop as low as $22,000.
“When there is a big drop, bitcoin price can move very quickly,” McClurg told Insider. “I think it could go as low as $22,000, but I’d be very surprised if it drops below $18,000.”
It’s tempting for retail investors to buy bottom in these situations, but it’s also pretty risky. If they do not buy Bitcoin at the right time, they may incur more losses.
“I wouldn’t advise people to sell all their bitcoin right now, but I wouldn’t tell them to buy either,” McClurg said. “I would consider buying again once we’re below $25,000. But it’s understandable to feel reluctant to add any risk to a portfolio right now.”