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Mark Mobius, renowned emerging markets investor and co-founder of Mobius Capital Partners, believes upcoming actions from the Federal Reserve could drag down the cryptocurrency market.
In an interview with Kitco News, Mobius says he expects financial markets, particularly cryptocurrencies such as Bitcoin and Ethereum, to drop if the Federal Reserve decides to rapidly taper asset purchases.
“They actually are doing a little bit of tapering, in any case, but if it’s done rapidly and suddenly, then you could have a real tantrum. It could have the markets affected dramatically, because people will then be looking for the finance, but it’s not there. The money will not be available.
I think you’re going to see, when that happens, the cryptocurrencies will be hit badly, and that will affect the psychology of many, many people, particularly young people who invested a lot of money in cryptocurrencies. And then of course, you’ll see a decline in the stock market.”
The investor adds that the crypto asset class will most likely be the first domino to fall once the Federal Reserve begins tapering and fiscal stimulus dries out.
“In order for these cryptocurrencies to maintain their value, they need more inputs of money. In other words, [you’ve got to] have more people coming in and believing these cryptocurrencies will go up in value. Of course, you have the same thing with the stock market, but cryptocurrencies [are] particularly vulnerable to a shortage of … extra cash.”
Mobius says that the technology industry is also vulnerable to an asset bubble pop.
“I’m talking about tech companies who are not earning any money … but are being propped up by hope, by people who hope that there will be another Amazon or there’ll be another Apple or whatever… These will probably be hit first.”