Survey: Tech Stocks and Cryptocurrencies Cudgeled as Fed Reduces Balance Sheet

The Federal Reserve’s plan is aimed at tightening credit and cooling down inflation, but what’s the collateral damage?

article-image

Federal Reserve Chair Jerome Powell | Blockworks exclusive art by Axel Rangel

share

key takeaways

  • Nearly half of survey respondents think tech stocks and cryptos remain the most vulnerable to the Fed’s quantitative tightening
  • About two-thirds of survey respondents say the four-decade bull run in Treasurys has come to an end

As the US Federal Reserve has begun reducing the holdings on its nearly $9 trillion balance sheet, tech stocks and cryptocurrencies will be hit hard, according to an MLIV Pulse survey reported by Bloomberg.

About 47% of respondents indicated tech stocks and cryptos are the most vulnerable to quantitative tightening, while only 7% picked mortgage-backed securities — which investors consider less vulnerable to the Fed’s new course of action. 

The survey, running May 31 through June 3, included 687 responses — ranging from ​​retail investors to market strategists.

The survey found traders active in the market during the 2008 financial crisis are concerned with the impact of the Fed’s balance sheet drawdown on junk bonds, and 72% are more likely to think the four-decade bull run in Treasurys is over — whereas new traders are focused on its impact on tech stocks and cryptos, and only 55% believe Treasurys are headed for a bear.

But Jack Farley, macro analyst and host of Blockworks’ Forward Guidance podcast, isn’t convinced quantitative tightening is bad news for crypto.

“I don’t think history supports the view that reduction of the Fed’s balance sheet is necessarily bad for crypto,” Farley told Blockworks in April. “The last (and only) instance of quantitative tightening by the Fed began in October 2017, and bitcoin went up 340% from then until its peak in December 2017.”

About 61% of respondents said the level at which the terminal fed funds rate peaks is more important than the amount by which the balance sheet shrinks, the survey also found. 

In March, the Fed raised interest rates a quarter percentage point and said more rate hikes may happen in the near future. The American Bankers Association’s Economic Advisory Committee believed the Fed’s current rate hike agenda can help curb inflation from above 8% to near the Fed’s objective of 2% over this year and next. 


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Top Icon.png

Research

Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.

/

article-image

Though the opposing flow trend is likely to slow over time, industry watchers note, bitcoin fund assets could one day eclipse the $90 billion gold ETF space

article-image

Celestia had the first mover advantage. EigenDA has staked ether. What sets Avail apart?

article-image

Bitcoin moved 1% higher Monday morning in New York, Matrixport analysts say $62,000 could happen next month

article-image

It’s hard to believe right now that crypto — even with all of its flexibility and massive capabilities — could ever be like cash on the internet

article-image

Michael Saylor announced Monday morning that MicroStrategy bought 3k more bitcoin after the X account was compromised over the weekend

article-image

Plus, Pudgy Penguins grows its brand and a group of Autoglyphs sell for $14.5 million