Bitcoin and the broader crypto market jumped after the Federal Reserve announced it was raising interest rates by 75 basis points on Wednesday. This week's gains have started to stabilize, but the crypto market still trading mostly higher. Matt Hougan, Chief Investment Officer at Bitwise Asset Management, joins Cheddar News' Closing Bell to discuss.

Closing Bell

What Federal Reserve's Rate Hike, Recession Fears Mean for Crypto Market

well as recession fears continue. But U. S. Officials say that we're not in one, it's still unclear whether the Fed's decision on Wednesday could provide enough momentum to the crypto market to sustain some of the recent gains that we've seen. So joining me now is matt Hogan chief investment officer a bit wise, asset management, Matt, thanks so much for joining on this friday. What's behind the latest rally that we've seen in the crypto space? Sure. I think the story here is that macro is no longer driving the crypto bus. You know, if we go back to what created the bear market in crypto, it was the Fed moving from quantitative easing to quantitative tightening, starting back in november of last year. Now we know what the Fed plans to do, jerome Powell is delivering on those promises and therefore things like the 75 basis point rate hike we saw are already priced into markets. What we know underneath the surface is the natural bias of crypto right now is up Crypto is making enormous technological progress. They're huge things to look forward to. Like the ethereum merge. So as long as the Fed isn't pushing crypto down once it normalizes once it's no longer the primary driver of the market, we see this upward momentum. I think that trend probably continues through the end of the year, but I don't think it's directionally straight. I think there will be uh and down significant volatility but the natural bias right now is up into the right because crypto is making so much technological and user progress. Okay, so macro aside matt, I know you're varying the weeds on some of the technical aspects of this market and the broader crypto space as well as to some of the positives that can move this crypto market higher. Talk to me more about the ethereum element that you mentioned earlier. Yeah, the biggest news in crypto right now is ethereum is going through what's called the merge and this is its transition from a proof of work consensus mechanism to a proof of stake consensus mechanism. The consensus mechanism is the core thing that makes the ethereum Blockchain operate. It's sort of like changing an airplane engine in midair but once it makes this switch on september 19th ethereum is carbon footprint will reduce by 99% ethereum inflation rate will will reduce by 75%. And long term holders of ethereum will be able to earn a 678% yield for investing in this for the long term. What that's going to do is catalyze a whole move of institutional and professional capital into ethereum is moving from, not from just Bitcoin to Bitcoin ethereum and other assets and this is an example of how crypto gets better over time. A lot of people think of it as a currency currencies don't upgrade but crypto block chains go through these technological upgrades and get better. This is a very big one and again, we know it's happening sometime in the next two months and it's a Okay, so another question that I have matt is some people invested in the crypto market at the top back in November. Bitcoin, let's just say roughly was at 60,000 if I remember correctly well elevated from where it is today. If the bias is up into the right in the crypto market, do you think we could return to that level? What would it take? Yeah, I suspect we'll return to that level and exceed it. But I don't expect that to happen this year and I think it's even questionable next year, but I do think ultimately the destination of crypto is actually many multiples of that. Look, we still face some headwinds this year. There's big regulatory news. You mentioned the coin based topic. Uh, there's some political capital Hill news. So there's both good themes and bad themes. Driving crypto that means volatility, but long term absolutely. We are going higher. And again, I think the bias from from these levels is up all else equal. I think the bias is up. What is the long term value of Cryptocurrency man? I think some people looking at the recent volatility and wondering is this a gamble? Could my money go to zero? Obviously you're a big believer in it. What is that long term value. Yeah. Look, Blockchain introduces new capabilities to the world that we've never had before. The ability to move money at the speed of the internet. The ability to program money, like software, the ability to have digital property rights. These are some of the biggest ideas that technology has introduced to the world since the internet. I think the size for those ideas in this economy is 10 2030 times bigger than it is today. We're still in like the internet circa 1996 on crypto. We haven't even gone mainstream. So you know, which particular assets is that? Bitcoin? Is that ethereum is it cosmos is it's Alana that's harder to say. But the ability to move money at the speed of the internet or program money like software or have digital property rights are going to be with us for the next 100 years and the market opportunity, there is many fold what crypto market is today very quickly because I'm tight on time. How much people have invested in their portfolio and Cryptocurrency 5% more or less. Yeah, most people are best 5% or lower. Our average client a bit wise is about 2.5%. That's enough to get real upside. If I'm right on kryptos trajectory but not enough to lose your shirt. If the people who are more bearish turn out to be right. All right matt Hogan always good to see you. Thank you so much matt, the chief investment officer of it wise, asset management