Moody's says crypto, asset markets overheated with downside risks

The risk of a correction in global asset markets, including cryptocurrency, has grown, according to Mark Zandi, Chief Economist at Moody's Analytics. He stated that despite recent price adjustments, cryptocurrencies, gold, and silver remain exposed to downside risks. Zandi pointed to several factors, noting that U.S. real gross domestic product (GDP) growth is below its 2.5% potential, employment is stagnant, and the unemployment rate is gradually rising. He added that the Personal Consumption Expenditures (PCE) price index, a key inflation gauge for the Fed, remains high at around 3%, while tariff uncertainties and military tensions related to Iran also pose a burden. Zandi further explained that as the Fed and global investors withdraw from the Treasury market, hedge funds engaged in leveraged arbitrage are filling the void. This situation, combined with a large fiscal deficit and substantial financing demands, could lead to a sharp rise in interest rates. "While the market is currently overheated by speculation, asset prices are instead falling sharply, delivering a shock to an already fragile economy," he concluded.