On Friday the Labor Department reported U.S. job growth rose by 263,000 during September, which was better than expected but still lower than August’s 315,000 additional jobs.
So does the decrease in new jobs signal a change in Federal Reserve thinking, and how would that affect cryptocurrencies?
Asset managers, from Ark Invest and Valkyrie see crypto as having hit bottom, meaning it can go no lower in price, at a time when the Federal Reserve’s “tug-of-war” with the global macro environment could lead to continued interest rate hikes.
“Whether the Federal Reserve oversteps and makes a policy mistake, we’re essentially pricing in a recession,” Frank Downing, director of research at Ark Invest, said on CoinDesk TV’s “First Mover” on Friday.
Steven McClurg, co-founder of asset management firm Valkyrie, agreed, adding that “we’re definitely in a recession.”
According to Downing, bitcoin (BTC) is showing signs of “constructive developments,” referring to the small increase of “supply held by long-term holders.”
“The cost basis of those long-term holders has actually climbed above the cost basis of short-term holders, which historically has been a strong bottoming signal,” Downing said.
Nonetheless, crypto has “gone down more than the rest of the market,” McClurg said.
“The markets are clearly in a downward trajectory at the moment,” McClurg said. But “crypto is probably closer to the bottom than the S&P  or Nasdaq.”
In the near term, McClurg said, “prices will continue to go down across all risk assets until there’s a pivot from the Federal Reserve.”
The Federal Reserve's Federal Open Markets Committee is likely to raise interest rates by 75 basis points at its next meeting in November, followed by a 50 bps rise in December and then upwards of 25 basis points two times after that over the next year, predicted McClurg.
Crypto separately managed accounts (SMAs) to hit the market
Despite Downing and McClurg’s bearish outlook in the near term, the fund managers are optimistic about the future of crypto.
The two asset management firms have each launched individual crypto-based separately managed accounts (SMA), which will primarily be managed by financial advisors who will serve as intermediaries for investors.
“We take that risk on for them and we manage that risk properly,” McClurg said. “Additionally, we have set it up to where they can move in and out of that product very quickly through a redemption or an order process.”
Downing of Ark Invest, which recently said it would be working with Eaglebook Advisors to manage risk for its investors, is operating under a similar strategy where it takes on crypto risk while also holding onto the keys.
“Advisors will be able to invest their client funds with low minimums, [which] has direct integrations to existing portfolio management tools used by advisors,” Downing said.
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