Moody’s Chief Economist Mark Zandi said the risk of a correction in global asset markets, including cryptocurrencies, has significantly increased. According to Zandi, despite recent price pullbacks, crypto assets, gold, and silver are still vulnerable to downside risks.
Zandi pointed to the slowdown in the US economy, stating that real Gross Domestic Product (GDP) growth remained below its potential level of 2.5 percent, employment growth stagnated, and the unemployment rate gradually increased.
He also emphasized that the Personal Consumption Expenditures (PCE) price index, one of the inflation indicators closely monitored by the US Federal Reserve (Fed), continues to hover around 3 percent.
Additionally, Zandi stated that uncertainties regarding customs tariffs and military tensions related to Iran were placing an extra burden on markets, and warned that financial conditions could tighten further.
Zandi stated that hedge funds engaging in leveraged arbitrage transactions have filled the void created by the withdrawal of the Fed and global investors from the US Treasury bond market, and that this, combined with a large budget deficit and high borrowing needs, could lead to a sharp rise in interest rates.
“The market is currently overheated by speculation. In contrast, asset prices are falling sharply, shocking an already fragile economy,” Zandi said, urging investors to exercise caution.
*This is not investment advice.