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The host of popular YouTube channel Coin Bureau believes an increase in interest rates as a result of the Federal Reserves actions could have a devastating impact on crypto asset prices.

The pseudonymous analyst known as Guy warns his 2.1 million YouTube subscribers that starting this month, the Federal Reserve will accelerate the selling of assets on its balance which he says is made up of US Treasuries and mortgage-backed securities.

According to Guy, the sell-off could have a profound impact on interest rates.

Thats because the interest rates on US Treasuries and mortgage-backed securities are essentially determined by price with a lower price resulting in higher interest rates. With the Fed selling off billions of dollars of these assets while the economy continues to slow down, its unclear whether there will be enough buyers to absorb the shock, meaning prices will drop.

This means that interest rates could rise faster than investors can handle and cause markets to crash even more. This is exactly what happened when the Fed started reducing its balance sheet in 2018.

In 2018, the S&P 500 lost about 20% of its value from its peak of 2,940 points at the time.

The Coin Bureau host highlights that a repeat of what happened back then could spell trouble for digital assets.

Given that cryptocurrency is highly correlated to the stock market with more volatility, this could translate to a 40% drop for the largest coins and tokens, with 60% or even 80% drops for most medium and small-cap altcoins with the absolute bottom being sometime early next year.

The Coin Bureau host says that Bitcoin (BTC) will experience the least impact on price relative to altcoins.

If history is any indication, Bitcoins BTC will experience the lowest losses in percentage terms as altcoin holders rotate whatever profits they have left into this de facto digital gold. Even then, the losses could still be more than most crypto holders can stomach.

At time of writing, BTC is swapping hands for $19,950, flat on the day.

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Featured Image: Shutterstock/Tithi Luadthong/Natalia Siiatovskaia

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