Recall, the rising rate is a measure to combat record high inflation, which reached 7.5 per cent last month. A rate hike will make bank loans more expensive, causing less money in the economy. As a result, investors will presumably get rid of risky investments, which include cryptocurrencies. Well, that, in turn, will strengthen the dollar – which is partly the purpose of such actions.

There are several rate hikes planned for 2022, which has led some crypto investors to assume and even tentatively accept a new phase of market decline. However, there are other points of view. One of them was voiced by Dan Morehead.

Where to invest money this year?

Here is one of Morehead’s quotes in which he shares his view of what is happening in the markets. The line was published by the Cointelegraph news publication.

I think when all is said and done, investors will be given a choice: they have to invest in something, and if rates go up, blockchain will be the most relatively attractive area to invest in.

So the expert believes that investors will still not want to leave the market and will invest in something. And because cryptocurrencies are capable of generating crazy percentages of returns, the choice could be in favour of digital assets.

Panthera Capital CEO Dan Morehead

The most popular opinion about a rate hike is that the stock market will fall, as the US Federal Reserve will curtail its stimulus of the US economy by printing currency. That said, the crypto market now has a very high correlation to securities, meaning a fall in their price would have a negative impact on Bitcoin’s value. This is exactly the prediction that many investors support.

However, Morehead is confident that bonds, equities and real estate will “cope” with the reversal of the Fed’s strategy. And the fact that cryptocurrency prices have been falling steadily since the beginning of winter, supposedly does not negate their attractiveness as an investment vehicle amid rising lending rates. Dan continues.

I think our markets will soon become independent. Investors will think: bonds will collapse when the Fed goes from being the only buyer on earth to a seller. Rising rates will make equities and real estate less attractive. So where should we invest when both these instruments fall? Blockchain is the best place to invest in such a scenario.

Rising inflation in the US

The head of Panthera Capital also highlighted his earlier statement he made during a conference call with investors earlier this month. At that time, he said that asset classes like gold or cryptocurrencies are not directly tied to interest rates like bonds.

Take note that blockchain is not cash-flow oriented. It is like gold. It can behave quite differently from interest rate-oriented assets.

Meanwhile, Morgan Stanley’s investment department has published a report on Etherium stating that the cryptocurrency’s share of the overall crypto market capitalisation could drop significantly if Ether has a strong rival project. Here’s a rejoinder from analysts.

Partly because of its more ambitious purpose, Etherium faces greater threats from competitors, scalability issues and challenges compared to Bitcoin. Additionally, Ether is more volatile than Bitcoin.

Comparison of capitalisations of Bitcoin, Etherium and major altcoins

The fact that the platform from Vitalik Buterin has smart contracts no longer makes it unique. Still, there are quite a few alternatives on the market that are significantly cheaper for users in terms of fees – Avalanche, Solana, Polkadot and Tezos. Experts continue.

Etherium faces more competition in the smart contracts space than Bitcoin in the savings space. Etherium could lose significant market share in favour of faster and cheaper alternatives.

It is important to remember, however, that this environment could change dramatically with Etherium’s transition to version 2 of its protocol and the new Proof-of-Stake algorithm. In this way, the developers promise to solve a huge number of problems – including scalability shortcomings and high fees.


We believe that cryptocurrencies do have the potential to grow - and in the most unpredictable economic situations. Still, coins act as a kind of independent asset class that is not like others. And while crypto is now highly correlated with equities, historically, the asset class has survived the downturns and made new highs. However, this is not true of all blockchain projects, so it is important to choose carefully.


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