Bitcoin Could See a 60% Price Drop, Warns Bloomberg Strategist
According to Bloomberg Intelligence’s Senior Macro Strategist, Mike McGlone, Bitcoin may experience a significant price drop of over 60%. McGlone attributes this potential decline to negative liquidity and increasing global interest rates, despite signs of an upcoming recession.
Bitcoin’s Critical Resistance Level and Potential Decline
McGlone believes that the United States is likely to face a recession by the end of 2023. He identifies $30,000 as a critical resistance level for Bitcoin and suggests that the cryptocurrency is more likely to decline towards the $10,000 range.
Risk for the Broader Cryptocurrency Market
In addition to Bitcoin, McGlone also highlights a significant risk for the broader cryptocurrency market. He believes that a stock market downturn triggered by a recession could negatively impact the crypto market. McGlone notes that the weakness observed in the crypto market during the third quarter of 2023 could be either a temporary setback or an indication of a recessionary trend.
Tightening Monetary Policies and Deflationary Implications
McGlone points out that central banks worldwide are tightening their monetary policies despite economic contraction signals in the US and Europe, as well as the ongoing property crisis in China. He sees these developments as having deflationary implications for cryptocurrencies.
Parallels with Historical Financial Events
Drawing parallels with historical financial events, McGlone mentions that the Bloomberg Galaxy Crypto Index (BGCI) is underperforming. He recalls instances where spikes in US Treasury yields preceded market crashes and crude oil prices peaked before significant downturns. McGlone suggests that similar patterns could emerge with Bitcoin, especially considering its historical influence on Federal Reserve policies.
Bitcoin’s Role in Global Asset Allocation
Jamie Coutts, a crypto market analyst at Bloomberg Intelligence, discusses the evolving role of Bitcoin in the global asset allocation landscape. He anticipates increased market volatility influenced by trends in yields, the US dollar, and the global M2 money supply. Coutts notes that Bitcoin and Gold are the only assets that have seen a decline in volatility since 2020, contrasting with fixed income assets and equities.
Bitcoin as a Risk Diversifier and Hedge Against Monetary Debasement
Coutts highlights Bitcoin’s decreasing volatility trend since 2017, excluding its early hyper-volatile years. Despite factors like the rising US dollar and 10-year Treasury Yields, along with a declining global M2 money supply, Coutts believes Bitcoin can serve as a risk diversifier and improve risk-adjusted returns. He suggests that asset allocators may increasingly turn to Bitcoin as a hedge against monetary debasement due to its advantages over bonds.
Hot Take: The Future of Bitcoin Amidst Economic Uncertainty
As economic uncertainty looms, analysts have differing views on the future of Bitcoin. While Bloomberg Intelligence’s Mike McGlone warns of a potential price drop for Bitcoin due to negative liquidity and rising interest rates, Jamie Coutts highlights its potential as a risk diversifier and hedge against monetary debasement. As investors navigate these uncertain times, it is crucial to consider both perspectives and evaluate the evolving role of cryptocurrencies in the global asset allocation landscape.
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