Mike McGlone, senior macro strategist at Bloomberg Intelligence, expressed his concerns about the current trajectory of Bitcoin (BTC) in a recent analysis, drawing parallels between price movements and the famous stock market bubble of 1929. McGlone’s comparison stems from the remarkable similarity in price patterns and interest rate conditions between the two periods. Here are the details…
Famous analyst made Dow Jones analogy for Bitcoin
McGlone points out, based on historical data, that the parabolic rise of Bitcoin’s price over the past decade is strikingly similar to that of the stock market on the way to the 1929 crash. McGlone underlines the importance of the high interest rate environment, reminiscent of the conditions before the stock market crash in 1930. The analyst points to a chart that shows the US discount rate, the interest rate charged to banks for loans from the Fed, along with the 100-week moving average of the Dow Jones Industrial Average (DJIA). It is noteworthy that the US discount rate peaked in 1929, just before the DJIA’s moving average fell.
With Bitcoin’s 100-week moving average also showing a downtrend amid the Fed’s sharp rise in interest rate last year, this parallel pattern raises concerns about a potential correction in the cryptocurrency market. McGlone emphasizes that the rise of Bitcoin has similarities with the stock market in the 1920s in terms of technological developments. It draws parallels between the emergence of Bitcoin and the proliferation of revolutionary technologies such as electricity, cars, air travel, and telephones nearly a century ago. Notably, both the parabolic rise of Bitcoin and the rise of groundbreaking technologies in the 1920s coincided with the periods of low interest rates sustained by the Fed.
What did McGlone’s previous predictions point to?
Addressing the potential bullish aspects of the situation, McGlone points out that the emergence of revolutionary technologies, parabolic price movements, excessive liquidity and speculation were common factors between the current state of Bitcoin and the stock market in the 1930s. However, he highlights an important difference, noting that the New York Fed responded to falling stock prices in 1929 by lowering interest rates, which is in contrast to the current environment. At the time of this writing, Bitcoin is trading at $26,020, prompting investors and analysts to watch price action closely in light of historical comparisons and its potential impact on the future trajectory of the cryptocurrency market.
It should be noted that McGlone, who has a history of making both correct and incorrect predictions about Bitcoin, as we have also reported as Kriptokoin.com, closely examines the market dynamics. While he had previously predicted that BTC would rise to $100,000 during the rally in 2021, he warned that such gains will happen in the long run. In addition, McGlone’s views were not mistaken, as he did not predict that Bitcoin would drop below $20,000.
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