The decisions to be taken by the Fed regarding rate hikes have a different impact this year. In the long run, however, inflation could still triumph as investments in Bitcoin (BTC), Ethereum (ETH) and gold are predicted to pay off. But until then, BitMEX exchange warns that volatility could drive away even the most determined crypto investors.

BitMEX believes the Fed will "respond" to rising inflation, unlike some other crypto analysts who don't expect the Fed to raise rates significantly. “The Fed has to respond now and it will,” the exchange’s research team wrote in a recent research report. He shared the chart below, which shows that inflation, as measured by the US Consumer Price Index (CPI), has reached its highest level since 1982.

Also, BitMEX researchers predict that rising rates will have a “huge impact on investor demand for financial assets,” which includes both stocks and cryptocurrencies. It adds that this is "an extraordinary level of financialization of the economy" and that financial assets are more sensitive to liquidity and financial flows than any fundamental value.

“A small percentage of investors will be patient to stick with their strategy”

In response to a question about how investors should prepare for such a scenario, the exchange emphasized that eventually inflation will win out. In this case, inflation protections such as gold, gold miners, BTC, ETH and index-linked bonds are expected to pay off. However, the scenario "could take five or ten years to process," according to the report. According to the stock market, markets will be turbulent in the interim, inflation is likely to drop, and only a small percentage of investors will have the patience and stamina to stick to their strategy all along.

Finally, BitMEX stated that “tactics and market timing are often seen as the work of an idiot.” Investors should instead "turn off the computers and sell index trackers" because they won't have a choice, according to the exchange. Meanwhile, BitMEX is calling for "buy $20,000 in Bitcoin and play the game".