Make Kitco Your Homepage

Fed rate hikes will have minimal impact on gold and Bitcoin this year, here’s why - Frank Holmes

Kitco News

(Kitco News) - The Federal Reserve is expected to raise interest rates between five and seven times this year. It already increased rates by 25 basis points last month. "Higher interest rates will not crash the gold or cryptocurrency market. Real interest rates will not go positive," explained Frank Holmes, Executive Chairman of HIVE Blockchain Technologies. "The crypto market is on its own trajectory."

Holmes discussed the impact rising interest rates will have on Bitcoin and gold prices with David Lin, Anchor at Kitco News on the sidelines at the Bitcoin 2022 Conference in Miami. HIVE Blockchain Technologies is the first publicly traded cryptocurrency miner. It is listed on the Toronto Venture Exchange.

"The Fed must be very careful in slowing down the economy in an election year, and of President Biden losing control of Congress. Rising interest rates is a very sensitive issue now. The only way the Fed could do it is if it had real positive interest rates, otherwise it would be a crisis to the overall economy," Holmes pointed out. "The 10-and 2-year bonds are now inverted. The stress is starting to show up in the system. But I think when push comes to shove, there will be a quick economic slowdown."

Holmes said it is highly possible we will be in a recession by the end of this year or in 2023. "One reason is because of China; its purchasing manufacturers index fell below 50. This means China is slowing down, because it shut down its system, which is 55% of all commodity demand," Holmes emphasized. "It's a very stressful drama, but let's see how much money China prints."

Kevin O'Leary: Bitcoin price is 'never going to zero,' here's why

Many experts expected crypto to act as a safe-haven asset like gold did during the Russian invasion of Ukraine. However, cryptos didn't rise like gold did in the early days of this geopolitical crisis or in the last couple of months. But Holmes disagrees. "Sure, Ethereum went down to $2,400, but it zapped right back up to $3,500. It's under $3,500 now. We at HIVE expanded our footprint, so we are producing an extra hundred thousand dollars a day," he disclosed. "From the lows on February 24, when the war started, Ethereum and Bitcoin have both gone up."

Holmes spoke about some of the challenges for cryptocurrencies. "The big headwind is regulations, the EU versus the U.S. in regulations. There's a big push by politicians in the U.S., and I hope Canada gets its act together to understand that regulators and politicians have to embrace young taxpayers," Holmes stressed.

Holmes advises investors to stay bullish. "Buy on the dips and hodl. All those gold bugs, make sure you tell your gold CEOs they should hodl, because they have free cash flow. That's what we do at HIVE. We mine Bitcoin and we hodl it, because we believe it's going to go higher," he said. "If I'm a gold miner and I produce it, I've got free cash flow. I should hodl it. Don't sell it now, it's too cheap."

For more on the impact rising interest rates will have on Bitcoin and gold prices, please watch the full video above.

Follow David Lin on Twitter: @davidlin_TV

Follow Kitco News on Twitter: @KitcoNewsNOW

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.