Inflation could start to “mellow out” towards the end of the year, giving the crypto market a chance to form a bottom later in 2022, Chris Burniske, a partner at the crypto-focused venture capital firm Placeholder Ventures, has predicted.
Speaking in an interview on Laura Shin’s Unchained Podcast, Burniske, who has also co-authored a popular book on cryptoasset investing Cryptoassets: The Innovative Investor's Guide to Bitcoin and Beyond, said that he believes the US Federal Reserve (Fed) will have gotten “max aggressive” towards the end of 2022.
He said this will happen as inflation starts to “mellow out year-over-year,” adding that it could even “surprise a bit to the downside” towards the end of the year.
Once this has happened, the Fed will start to “lighten” its approach, Burniske predicted, noting that this coincides with the midterm elections in the US in early November of this year.
A bottom in both the crypto and stock markets can therefore be expected “sometime in the back half of 2022,” Burniske said.
He added that he anticipates the 4th quarter to be a quarter of “relief” because inflation will then come down and “the Fed doesn't have to be as aggressive.”
“Hopefully, by that time we have the ETH Merge kicking in, and there are starting to be ‘new green shoot’ narratives that are moving into place for crypto,” Burniske said, referring to the highly anticipated event that will merge Ethereum’s (ETH) current proof-of-work (PoW) blockchain with the new proof-of-stake (PoS) chain.
He further reminded listeners that there are “a lot of builders building cool stuff in crypto right now.”
“It doesn't happen in a quarter or even half a year, but you can start to see some of that within a year or two and so that's where I'm pretty optimistic for 2023,” Burniske said, before adding a word of caution:
“It's going to be volatile because crypto is always volatile […] but my working framework right now is that we see like max panic sometime in the back half of 2022.”