Amid crypto market volatility, Bloomberg’s Mike McGlone warns of a potential severe drop in Bitcoin value. McGlone informs his over 57,800 Twitter followers that Bitcoin has nearly quadrupled.
This surge occurred since the Federal Reserve initiated a major money supply expansion amid the COVID market meltdown. However, he regards Bitcoin as potentially unstable in the current financial situation.
That the #FederalReserve has kept hiking rates in 1H despite a bank run, plunging commodities and producer prices may portend deflation potential for risk assets. Peaking #Bitcoin and #copper vs. rallying #equitymarkets appears as an unsustainable trajectory. pic.twitter.com/deEhESQ62u
— Mike McGlone (@mikemcglone11) May 22, 2023
McGlone acknowledges the decreasing liquidity and rising rates, suggesting the potential for Bitcoin to revert back to its initial rally point of $7,000. This situation would indicate a significant decline of approximately 75% from the current price of $26,889. It was mentioned in his commentary.
McGlone explains Bitcoin’s historical prospering pattern when liquidity is abundant and faltering when liquidity is scarce. He highlights his preference for Bitcoin to maintain its 52-week downsloping mean. He also mentions the Federal Reserve’s tenacity in tightening policy twice despite a bank run.
Falling copper and crypto prices heed the warning, while the stock market remains resilient amid this contrast. McGlone dismisses Bitcoin as a risk-off asset like gold in a conversation with Scott Melker, citing current financial conditions.
He insists that Bitcoin needs to demonstrate a significant deviation from the performance of stocks before he would classify it as a risk-off asset. McGlone maintains a positive perspective on gold. To some extent, he also sees a promising future for Bitcoin.
Nevertheless, he highlights the issue of risk assets experiencing both a rise and fall concurrently in the past year. He indicates that instances of Bitcoin’s distinct strength have been infrequent. He suggests a significant drop in the S&P 500, with Bitcoin avoiding new lows, to establish it as a safe-haven asset.
Bitcoin’s Performance & Market Conditions
McGlone ends by emphasizing Bitcoin’s success in the face of liquidity inflows. Before the significant liquidity injection in 2020, Bitcoin averaged $7,000 in 2019, rising to $60,000. Even at $27,000, Bitcoin is still four times its pre-liquidity-pump price, implying a possible mean reversion risk.
He implies that the present market may not favor long-risk asset holdings. Mike McGlone is cautiously optimistic about Bitcoin’s potential as a store of value, adding to the insights above. His thoughts concerning the likely mean reversion back to $7,000 point to a more cautious and critical attitude to Bitcoin’s prospects.
Additionally, the present market conditions further contribute to this perspective. McGlone asserts Bitcoin needs notable deviation from stocks to earn recognition as a risk-off asset. This demonstrates his deep grasp of Bitcoin’s market position. He hopes the cryptocurrency operates independently, establishing trust as a store of wealth.
McGlone’s statements show faith in Bitcoin’s lasting strength, even with anticipated short-term price declines. He points out that Bitcoin’s current price is four times its pre-liquidity-pump average, emphasizing the cryptocurrency’s notable rise, even in the face of financial turmoil.
McGlone acknowledges Bitcoin’s potential as a value store yet urges caution due to its short-term volatility. His insights on Bitcoin’s market performance may imply that he sees Bitcoin changing and maturing in the future. Perhaps this will make it a more established and dependable asset class.