Bloomberg senior commodity strategist Mike McGlone says the speculative rally in meme coins such as Dogecoin and Shiba Inu last year “indicate the excesses in crypto that are ripe for purging in 2022.”
In a report released Jan. 5, McGlone said that prospects of an interest rate hike from the U.S. Federal Reserve could pressure the broad crypto market, and possibly collapse some of the existing 16,000 digital currencies.
“Shiba Inu in 2H [second half of 2021] and Dogecoin in 1H [first half of 2021], are examples of speculative hype-coins better classified as fun for gamblers on an unprecedented 24/7 global scale,” McGlone mocked.
He spoke as the Fed on Wednesday announced plans to raise its benchmark interest rate to one percent in 2022. Three more hikes will come in 2023, and another two the year after that, all in an effort to combat inflation.
The decision came earlier than expected, and has sent risk assets such as stocks and crypto into a tailspin. Bitcoin tumbled to a low of about $41,100 on Friday, down 10% from 48 hours earlier. Ethereum fell more than 15% to $3,200 over the same period.
Dogecoin and Shiba Inu, both created as satirical online coins, have fallen much faster and harder than BTC and ETH, the two most valued bonafide crypto assets. Doge is down 79% since its all-time high of 74 cents in May, and currently trades at around 15 cents.
Shiba Inu has tanked 67% since hitting a record high of $0.00008845 – that’s just a fraction of a cent – on Oct. 28, according to Coinmarketcap data.
Tread with caution: meme coins ahead
Bob Reid, CEO of blockchain financial firm Everest, told BeInCrypto that the Federal Reserve expediting “its rate hike [will] be bad for cryptocurrencies.”
As interest rates rise, he said, conservative mainstream investors, who had started to adopt digital assets, will likely “return to more stable and secure investment options”.
McGlone, the Bloomberg analyst, warned that “interchange among mostly speculative crypto assets competing with bitcoin, ethereum and tether (USDT) is a pattern that should instill investor caution.”
He had the examples of litecoin and XRP in mind when he spoke. The two were hounded out of the top five most valuable cryptocurrencies by “dog coins” such as dogecoin and shiba inu riding on the meme asset euphoria of 2021.
Both doge and shiba have since fallen outside the top ten, but “It is this enduring jockeying for position among top cryptos, often driven by hype and speculation, that leads us to view most that rise swiftly to the top with trepidation,” said McGlone.
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