A “true test” is coming for Bitcoin (BTC), Bloomberg analyst Mike McGlone warns – here is the timeline
Mike McGlone, senior macro strategist at Bloomberg Intelligence, warns that Bitcoin (BTC) is likely to face a major test in the second half (2H) of 2023.
McGlone tells his 58,800 Twitter followers that after a strong performance in the first half of the year (1H), Bitcoin is likely to endure harsh recessionary conditions over the next six months.
The macro expert predicts that the stock market will start falling and Bitcoin will have a chance to prove itself as a store of value or “digital gold” by not falling along with stocks.
“Bitcoin’s 84% gain in the first half of the year was roughly double that of the Nasdaq 100 and annual volatility (risk-adjusted) is consistent.” It’s 2H that define the benchmark crypto as a high-beta version of the stock market could, or for their potential to be digital gold in a world that is evolving like this.
Our tendency is more in the middle. We believe a real test for Bitcoin is likely to come when the stock market eventually enters a bear market, which is typical of US recessions.”
McGlone also warns that while the Federal Reserve has been quick to ease monetary policy in previous recessions, the central bank may be reluctant to do so this time due to high inflation.
“During the two major economic downturns since the start of the millennium, declines in the S&P 500 of around 50% have been accompanied by significant easing by central banks. That might have changed. Bloomberg Economics warns that the Fed is unlikely to ease due to stubborn inflation. Our chart shows Bitcoin hovering at $30,000 but lagging the Nasdaq’s Q2 surge.”
Source: Mike McGlone/Twitter
According to McGlone, the crypto market was already showing a softening in the second quarter (2Q) of the year as stocks rallied while the leading digital assets tracked by the Bloomberg Galaxy Crypto Index (BGCI) declined.
“Mid Year Outlook: Cryptos – The stock market continues to post gains and could destroy the fundamentals for cryptos. That the Bloomberg Galaxy Crypto Index fell in the second quarter despite the strong upleg in the Nasdaq 100 Stock Index points to divergent weakness in the crypto market. A 2% decline in the Bloomberg Galaxy Crypto Index (BGCI) in the second quarter versus the 15% rise in the Nasdaq 100 Stock Index shows the relative weakness of the cryptocurrency…
Our chart shows that the BGCI is below its 2017 peak and the Nasdaq 100 breaks out to the upside, although the future of federal funds in one year (FF13) shows additional caution.”
Source: Mike McGlone/Twitter
McGlone also says risk assets like Bitcoin are facing headwinds as Bloomberg Economics predicts a recession in the second half of the year and the US unemployment rate will hit 4.3%, up from 3.6% currently.
Bitcoin is trading at $30,415 at the time of writing, up 1.2% over the past seven days.
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