Previously Goldman Sachs Group Inc. Zach Pandl, who works as a strategist at his company and was recently appointed as a research manager at crypto fund provider Grayscale Investments LLC, explained a scenario where cryptocurrencies will return to its old days.
If the US economy manages to land softly, the recovery in the crypto market could continue this year. In a note, Pandl wrote that a scenario of low inflation and steady growth would likely help risky assets, including crypto, by allowing the Federal Reserve to lower real interest rates. Pandl added:
The crypto recovery could stall in the near term if the central bank decides to raise real interest rates further or if its monetary tightening to date plunges the economy into recession.
Many investors feel that the Fed’s most aggressive tightening campaign since the 1980s is coming to an end as price pressures subside. That prospect helped fuel a crypto resurgence earlier this year, as did optimism that the US could allow its first spot Bitcoin exchange-traded funds, but the rally has since stalled. If the US economy does not go into a recession and interest rate cuts begin, the crypto market may see gains this year.