A Morgan Stanley analyst has issued a major warning that may impact risky assets, including stocks and cryptocurrencies such as Ethereum, Jasmy, Cardano, Kaspa, and PEPE.
His statement came as these tokens attempted to bounce back. The Ethereum (ETH) price has risen to $1,575, a slight increase from the year-to-date low of $1,385.
JasmyCoin (JASMY) price surged to $0.015 on Tuesday, representing a 70% increase from its lowest level this month. Cardano (ADA) soared by 20% from its lowest point this year.
Other tokens like Kaspa (KAS) and Pepe (PEPE) have also bounced back by double digits from their YTD lows.
Morgan Stanley warning on interest rates
Bitcoin and top altcoins like Cardano, Ethereum, Jasmy, Kaspa, and PEPE could suffer a substantial reversal if a statement by a Morgan Stanley analyst happens.
In an interview with CNBC, Seth Carpenter, a top analyst at the investment bank, said that the Fed may not cut interest rates this year after all.
He believes that inflation was the main risk facing the US economy this year. He said:
“Inflation has not come down to the Fed’s target of 2.0% and is still too high, and we have tariffs that are coming in. We know from history that tariffs lead to inflation first and a hit on economic growth. With inflation as high as it is, we don’t expect the Fed to cut this year because it will be a clear and present danger.”
His statement comes at a time when concerns are being raised about the Fed. Jerome Powell and top officials like Austan Goolsbee and Patrick Harker have insisted that the bank will be patient when it comes to cutting rates. Their goal is to have evidence that inflation is moving closer to the 2% target.
The statement also comes at a time when Donald Trump is ratcheting pressure on the Fed to start cutting interest rates. He believes that the bank lowered rates before the election to help Joe Biden win. Trump is also looking for a scapegoat as the economy slows and the stock market plunges.
Why the warning matters for ETH, Cardano, Jasmy, Kaspa, and PEPE
Morgan Stanley’s warning has a major implication for all assets, including stocks and cryptocurrencies like Ethereum, Cardano, Jasmy, Kaspa, and PEPE. It also has an implication on assets like stocks and the bond market.
First, if the Fed hints that it will not cut interest rates, it will raise concerns that Donald Trump may try to fire Jay Powell, the Fed Chair, and install another official, such as Kevin Warsh, who would be ready to cut interest rates.
A US president firing the Fed Chair would lead to substantial volatility that would affect all assets, including altcoins. On the positive side, there is a likelihood that the Supreme Court will not allow him to do that.
Second, a highly hawkish Fed would likely lead to a rotation away from riskier assets, such as cryptocurrencies and stocks. Historically, these assets have underperformed the market when the Fed is highly hawkish and have performed well when it is cutting rates. On the positive side, there are signs that the US economy will slow down, with recession odds rising. As such, there is a likelihood that the Fed will intervene as it has always done in the past. Such a move would likely boost crypto and stock prices.
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