The Fed to hike rates again in November, rate cuts coming only in 2025, here's why - Pat LaVecchia
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(Kitco News) Against most market odds, the Federal Reserve can still surprise investors with an additional rate hike in November, with a higher-for-longer narrative yet to filter through the macro environment, said Pat LaVecchia, CEO of Oasis Pro.
At the September meeting, the Fed followed through on a hawkish pause, promising higher for longer interest rates as economic growth continued to be stronger than expected. This is why the tightening cycle might not be over, LaVecchia told Kitco News.
"The next rate hike will occur, even though the statistics suggest it won't. I do think it'll be November," LaVecchia said on the sidelines of the Mainnet Conference, which took place in New York City between September 20-22. "And then 2024 will be a steady state."
Rate cuts won't come until 2025, LaVecchia added, noting that he is not ruling out a soft landing in the future.
LaVecchia also pointed out that the U.S. has been seeing the concept of a "rolling recession" that is industry-based. To find out what it means for the economy, rates, and investment, watch the video above.
This market could be worth $30 trillion in 10 years
On the investment front, LaVecchia is keeping a close eye on the developments in the tokenization space, especially the tokenization of U.S. Treasuries.
Tokenization of real-world assets (RWAs) is a digital representation of assets on the blockchain with digital tokens. This allows assets like real estate, commodities, and even U.S. Treasuries to be divided, traded, and accessed more efficiently and transparently.
Over a billion dollars of U.S. Treasuries have already been tokenized, LaVecchia said, adding that this market appeals to crypto funds that are looking for a safe return within the digital assets space.
"We're crawling right now. And eventually, we've got to get through this initial phase of what I call proof of concept. And then it will grow from there," LaVecchia said.
There is a particular case to be made for tokenized U.S. Treasuries right now, given that yields on the 10-year U.S. Treasuries climbed and are hovering around 15-year highs at 4.68%.
"Right now, the Treasury buyers are only institutions," LaVecchia said. "Wouldn't it be interesting that when the Treasury issues securities, treasury bills, or bonds, they can open it up to accredited investors and retail investors directly?"
This will create more demand for the U.S. Treasury market and other U.S. debt instruments. Watch the video above to find out to what extent tokenized U.S. Treasury can help keep the U.S. dollar in high demand.
In a decade from now, Citibank estimates that the tokenization industry will be worth around $10 trillion, which LaVecchia views as a conservative estimate. "I would double or triple that," he said.
The growth witnessed already is very impressive, with the tokenization of real-world assets expanding from $300 million last year to billions this year. "Even if it gets to $10 or $20 billion, that's a drop in the bucket. The market opportunity is much grander than that," LaVecchia noted.
For LaVecchia's 2024 price forecast for Bitcoin and why next year's halving might be different from others that were followed by a doubling in the price of Bitcoin, watch the video above.
LaVecchia also shared his thoughts on the U.S. 2024 election and the impact on crypto regulation. Watch the video above to find out why the crypto market might not see "anything of substance in the next 18 to 24 months."