Jamie Dimon has warned bitcoin investors to “brace yourself” for market instability. This is because the Fed will begin executing its “quantitative tightening” policies, which will include the Fed withdrawing liquidity from the market.
“I said they’re storm clouds,” Dimon warned. “They’re big storm clouds here. It’s a hurricane [and] that hurricane is right out there down the road coming our way. We just don’t know if it’s a minor one or Superstorm Sandy.”
The Cryptocurrency Market
Looking at the charts, it is clear that the crypto market had a difficult first half of 2022. The largest and most established coins in the cryptocurrency market, such as Bitcoin and Ethereum, are all down at least 50%, and more in the case of Cardano and Binance Coin.
More than R15.4 trillion has been wiped off the market in less than a year, and if Dimon is correct, this is merely the beginning. If the Fed begins quantitative tightening and drains liquidity from the market, most investors’ purchasing power would suffer, prompting more money to leave cryptocurrencies.
A drop of this magnitude might throw the market back a couple of years, putting it in the territory of 2020 lows. If the crypto market continues to follow the path of the stock market, which has been steadily declining this year, a major fall in liquidity will rock the stock market significantly, causing an adverse effect on the crypto market.