- Bridgewater Fund founder Ray Dalio published an article about rising inflation rates in the U.S. and their consequences.
- The investor explains the Correlation between inflation, interest rates, markets, and economic growth.
- Falling crypto prices present a perfect opportunity for investors to reduce their acquisition costs.
Ray Dalio, founder, co-chief investment officer, and member of the premier asset management firm Bridgewater Board, published an article on US inflation on September 14. The article discusses how inflation, interest rates, markets, and economic growth relate to each other.
Dalio begins the article by briefing the audience on how inflation works. When inflation is high, central banks are bound to tighten financial policies and weaken the economy to bring it down. Therefore, he predicts that the Federal Reserve will eventually push high interest rates and increase credit growth rates.
Moreover, if interest rates rise above 4.5%, as Dalio predicts, the U.S. stock market will suffer stock failures by 30%. He concludes the article with two sets of consequences that might occur with rising rates.
First, there will be a nearly 20% negative impact on equity prices. Secondly, there will be about a 10% decline in incomes produced by assets due to the weaker economy.
However, how does this impact the cryptocurrency market?
The current inflation has definitely been reflected in the crypto-verse as well. While the market was facing a dip recently, the last few days have been turbulent. The largest cryptocurrency, Bitcoin, rose to $22,645 on September 15. Since then, it has plummeted in value, falling back to $20,300.
The soaring inflation rates caused an 11% loss in BTC value in less than 12 hours. Even the second most popular cryptocurrency, Ethereum, fell from $1,743 to $1,543 during the same time.
In addition, the global market capitalization of the crypto industry also plunged 9%, falling from $1.07 trillion to around $977 billion overnight. However, falling prices are a great opportunity for existing investors to reduce their cost of acquisition by buying more coins at a lower rate. Evidence shows that the current bear market conditions will end soon, and crypto prices will shoot up again.