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Experienced cryptocurrency analyst Nicholas Merten has warned that major tech stocks and cryptocurrencies may underperform in the coming years, contrary to expectations. The analyst does not expect the overall cryptocurrency market, including Bitcoin (BTC), to perform as well as anticipated.
A Contrary Warning for Bitcoin and Altcoins
Nicholas Merten, the host of DataDash, made a contrary prediction during a recent strategy session, suggesting that technology giants and major altcoins, including BTC, may generate insufficient gains over the next few years. In his warning, Merten stated:
One of the worst-performing assets in the next few years could be cryptocurrencies and FAANG stocks, referring to major technology companies such as Facebook, Amazon, Netflix, Google, Microsoft, and Apple, which have achieved massive profits and outperformed the stock market in general. I’m not just talking about Bitcoin, but also the altcoin market and the overall cryptocurrency market that used to generate crazy profits.
The Analyst’s Forecast is Based on a Decline in Global Liquidity
Merten’s thesis is based on the decline in liquidity in the markets, among other factors, due to the hawkish monetary policy pursued by the Federal Reserve (Fed). The analyst justified his thesis with the following statements:
We are in an environment where liquidity is decreasing. Essentially, we are in an environment where the cryptocurrency market, more importantly, struggles to find a value proposition after achieving significant gains. Furthermore, the cryptocurrency market will have a much harder time going from a current market value of one trillion dollars to ten trillion dollars, for example, from a market value of one hundred billion dollars to one trillion dollars.
To encourage bull markets, you need much more liquidity and much more fundamental value creation. As I emphasize here, liquidity is currently working against us. The Fed is reducing its balance sheet by approximately 100 billion dollars every month.
The analyst highlights that global liquidity seems ready to decline to new lows, stating, “When considering central banks in the US and other countries as a whole, the federal funds rate has begun to rise to the highest levels seen since 2007. We are at similar levels to what we saw in the early 1990s or the beginning of the 1970s in order to control inflation.”
