Mike McGlone, senior commodities strategist at Bloomberg, believes that the speculative rally in “memes” cryptocurrencies such as Dogecoin and Shiba Inu in 2021 “indicates the excesses of cryptocurrencies ripe for a purge in 2022.”
In a report released Jan. 5, Mike McGlone said the prospect of an interest rate hike from the U.S. Federal Reserve could put pressure on the large cryptocurrency market, and possibly crash some of the 16 000 existing digital currencies.
“Shiba Inu in the second half of 2021 and Dogecoin in the first half of 2021 are examples of speculative ‘hype-coins’ better classified as a form of gamer entertainment on an unprecedented 24/7 global scale,” mocked McGlone.
The analyst expressed his point of view expressed when the US Federal Reserve announced this Wednesday, January 5, its intention to raise its benchmark interest rate to 1% in 2022. Three other increases will take place in 2023, and two more the following year, all with the aim of fighting inflation.
The move came sooner than expected, and triggered a free fall in risky assets like stocks and cryptocurrencies. Bitcoin fell to a low of around $ 41,100 on Friday, January 7, a 10% drop from 48 hours earlier. Ethereum, for its part, fell more than 15%, falling to $ 3,200 over the same period.
Dogecoin and Shiba Inu, cryptocurrencies both created as satirical online tokens, fell much faster and harder than BTC and ETH, the two highest-valued crypto assets in the industry. The DOGE has lost 79% from its all-time high of $ 0.74 in May, and is currently trading at around $ 0.15.
According to data from Coinmarketcap, Shiba Inu, for its part, has fallen 67% since its record high of $ 0.00008845 (or a fraction of a dime) on October 28.
Caution is required with “memecoin” type cryptocurrencies
Bob Reid, CEO of blockchain financial firm Everest, told BeInCrypto that the Federal Reserve’s decision to accelerate “its rate hike [sera] harmful for cryptocurrencies ”.
As interest rates rise, he said, traditional conservative investors, who had started to embrace digital assets, are likely to “return to more stable and secure investment options.”
McGlone, the analyst for Bloomberg, warned that “the swap between mostly speculative crypto assets competing with Bitcoin, Ethereum and Tether (USDT) is a trend that should prompt investors to be cautious.”
The analyst was thinking in particular of the examples of Litecoin and XRP. These two currencies were kicked out of the top 5 most valuable cryptocurrencies, to be replaced by “dog-headed currencies” such as Dogecoin and Shiba Inu, which benefited from the euphoria of memes assets in 2021.
The DOGE and the SHIB have since left the top 10, but “it is this constant struggle for a position among the most important cryptocurrencies, often driven by hype and speculation, that causes us to view with concern most of the cryptos that are climbing to the top quickly, ”McGlone said.
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