In 2023, investor sentiment has been volatile, and a recent report by ARK Invest suggests that the remainder of the year could present economic challenges. ARK Invest, which manages $13.9 billion in assets, is known for its strong advocacy of cryptocurrencies, particularly Bitcoin (BTC). The investment firm has applied for a Bitcoin exchange-traded fund (ETF) in partnership with European asset manager 21Shares, and its most recent request for a spot BTC ETF is currently pending review by the United States Securities and Exchange Commission.
Despite ARK’s bullish view on Bitcoin, supported by research on the potential transformation of corporate operations through the fusion of Bitcoin and artificial intelligence, the investment firm does not foresee a straightforward path for a Bitcoin bull run given the current macroeconomic conditions.
In its newsletter, ARK points to several reasons for its less-than-optimistic scenario for cryptocurrencies. One of these reasons is the Federal Reserve’s implementation of a restrictive monetary policy, indicated by the natural rate of interest, which is the theoretical rate at which the economy neither expands nor contracts. When this indicator exceeds the real federal funds policy rate, it puts pressure on lending and borrowing rates. ARK expects that inflation will continue to slow down, which would drive up the real federal funds policy rate and increase the gap above the natural rate of interest. This bearish macroeconomic view is influenced by this indicator.
Another focus of the report is the divergence between real GDP (production) and GDI (income). Normally, GDP and GDI should closely align, as income earned should equal the value of goods and services produced. However, recent data shows that real GDP is approximately 3% higher than real GDI, suggesting that downward revisions in production data should be expected.
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U.S. employment data is also a concern for ARK Invest. The government has revised these figures downward for six consecutive months, indicating a weaker labor market than initially reported. The fact that the last time six consecutive months of downward revisions occurred was in 2007, just before the onset of the Great Financial Crisis, is particularly notable.
Additionally, the report highlights the possible emergence of stagflation, which refers to a combination of slow economic growth and high inflation. The reversal of the yearlong trend of price discounts driven by increased consumer spending suggests that inflation may be exerting upward pressure. This could prolong ongoing macroeconomic uncertainty in the coming months, raising questions about how cryptocurrency investors might react if this trend confirms lower economic growth and higher inflation.
It is important to note that this article is for general information purposes and should not be taken as legal or investment advice. The views expressed are the author’s alone and do not necessarily reflect the views of Cointelegraph.
