Bank of America Issues A Dire Warning About A Looming Recession That Might Send Cryptocurrency Prices Soaring To New Highs.

The Bank of America (BofA) predicts a massive recession as the Federal Reserve tightens its monetary policies and the US economy continues to struggle under the weight of rising inflation.

According to Reuters, Bank of America’s chief investment strategist Michael Hartnett stated in a weekly note that the US economy might suffer from “inflation shock” and “rates shock” as a result of what he called “inflation shock” and “rates shock.”

The Federal Reserve announced last week that it will begin reducing assets from its $9 trillion balance sheet at a rate twice as fast as it did during its previous “quantitative tightening” exercise. According to minutes from a March FOMC meeting, a majority of commissioners want the central bank to raise its benchmark interest rate by 50 basis points as part of a plan to bring inflation down from four-decade highs.

Jeremy Powell stated on Wednesday:

“the American economy is very strong and well-positioned to handle tighter monetary policy. Inflation is likely to take longer to return to our price stability goal than previously projected,”

Despite the assurance, Michael believes a recession will occur, expecting a 1.5% increase in unemployment. This will be on top of the already inverted 10-year yield, which has traditionally signaled the start of every US recession.

Cash, commodities, and cryptocurrencies, on the other hand, Michael claimed, would certainly outperform bonds and stocks in the face of this economic instability since they are deemed inflation-proof.

Despite the US Federal Reserve and microeconomic headwinds likely restricting the upside of cryptocurrencies, Alkesh Shah, Global Crypto and Digital Asset Strategist at the bank, ruled out the likelihood of a crypto winter in a paper released in late February. 

To him, the rate of adoption and expansion in development activity only indicated that cryptocurrencies will continue to gain strength.

After avoiding cryptocurrencies for a long time, BofA has been supporting the embryonic industry since the summer of 2021, when it established a cryptocurrency research team. In July 2021, the bank began offering bitcoin futures trading to some of its clients.

The Bank of America deemed BTC “important” in a report on digital assets released in January, noting that the crypto market is “too large to ignore” and complimenting native coins like Solana and Chainlink.

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