There are warnings that a terrible recession could soon hit the United States economy as the Federal Reserve tightens its monetary policy to tame the rising inflation. However, assets such as cryptocurrency could benefit from this impending recession, according to Bank of America (BofA) strategists in a weekly research note.
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Crypto Could Benefit From the Impending Recession
In the note to clients as reported by Reuters, Michael Hartnett, BofA chief investment strategist, wrote, “’Inflation shock’ worsening, ‘rates shock’ just beginning, ‘recession shock’ coming.”
Hartnett further pointed out that in this context, assets such as cryptocurrencies could outperform bonds and stocks.
It can be recalled that the Federal Reserve had signaled the plan to start culling asset from its $9 trillion balance sheet at its meeting in May and will do it at relatively twice the pace it did in its previous quantitative tightening exercise as it confronts inflation running at a four-decade high.
Also, a large number of investors also expect the central bank to increase its key interest rate by 50 basis point.
In terms of notable weekly flows, Hartnett of BofA said emerging market equity funds enjoyed the biggest inflow in ten weeks at $5.3 billion in the week to Wednesday while emerging market debt vehicles attracted $2.2 billion, their best week since September.
It was also eight weeks of outflows for European equities at $1.6 billion while U.S. stocks enjoyed their second week of inflows, adding $1.5 billion in the week to Wednesday.
Bank of America’s Support for Crypto Industry Keeps Growing
After years of ignoring the crypto industry, Bank of America started showing support in the summer of 2021 after setting up a cryptocurrency research team. The bank also launched a Bitcoin futures trading service for some of its clients in July 2021.
Also in January, the bank described Bitcoin (BTC) as “important”, pointing out that the crypto industry is too large to ignore while praising various digital assets such as Solana (SOL) and Chainlink (LINK).
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