Interest Rate Hikes to Weaken the Crypto Market, Says Morgan Stanley

The cryptocurrency market has experienced selling pressure in recent months, with the total market cap dropping below the $2 trillion mark again.

Central Bank Tightening is Putting Pressure on the Crypto Market

Analysts at Morgan Stanley believe that the upcoming policies by central banks around the world will put pressure on the cryptocurrency market in the coming months.

According to the analysts in a recent research note, the crypto market has benefited from low-interest rates, expansion of central bank balance sheets, and government stimulus in the last two years.

However, the researchers led by Sheena Shah said leveraged crypto markets are now weakening as the United States Federal Reserve and other central banks around the world slow their balance sheet expansion.

The apex banks are also preparing interest rate hikes in the coming months. The US Fed is expected to introduce four rate hikes before the end of the year.

Morgan Stanley analysts believe that these policies will affect the cryptocurrency market over the next few months. The analysts added that retail investor sentiment on social media is turning less bullish.

The ongoing bearish trend in the market has also contributed to the current social media reaction.

The cryptocurrency market has underperformed in recent weeks. Bitcoin has lost more than 30% of its value in the past two months. At press time, BTC is trading above the $42k level, down from the all-time high of $69k it achieved in November.

Morgan Stanley Holds GBTC

Despite its recent analysis of Bitcoin, Morgan Stanley holds Bitcoin indirectly via the Grayscale Bitcoin Trust (GBTC). In an SEC filing in July, the bank revealed that it had acquired 28,000 shares of the GBTC.

The investment came at a time when Bitcoin was struggling around the $30k level. As of November 24, Morgan Stanley held 6,626,381 shares of GBTC (worth $303 million at the time).