Bloomberg Commodity Strategist Mike McGlone makes important statements about Bitcoin and cryptocurrencies. There is an issue he drew attention to in his statement on Twitter. It highlighted the worrying trend in the cryptocurrency market despite Bitcoin (BTC) rising above $28,000.
Crypto recession is around the corner
McGlone notes that cryptocurrencies are currently grappling with the specter of a recession. He also highlights that Q3 weakness in the crypto space could be a temporary recovery spurt or a more ominous sign of an impending recession. As the analyst noted, prevailing thinking leans towards the second possibility. According to the analyst, this situation inevitably affects the decision-making mechanisms of investors.
The logic behind this perspective is based on the performance of various risk assets that have shown gains throughout 2023 but then declined in the current quarter. Despite signs of economic contraction in the US and Europe and a housing crisis with deflationary effects in China, most central banks are insisting on tightening measures. This background sets the stage for a nuanced analysis of the crypto market.
Parallels between 1987 and 2008 peak oil prices
The Bloomberg Galaxy Crypto Index (BGCI) is underperforming according to expectations. The analyst says this could mean fundamental change for the asset class that is used to thriving in a zero interest rate environment. Drawing historical parallels, the strategist looks back to before the 1987 crash. He points to examples such as the rise in US Treasury yields and the peak in crude oil prices in July 2008.
The narrative also explores the correlation between Bitcoin’s declines and Federal Reserve policy axes. This observation indicates that Bitcoin’s movements can serve as a leading indicator. It also suggests it can provide insight into potential changes in broader market liquidity.
Cautious outlook towards crypto ETFs
McGlone draws parallels with his cautious view of crypto ETFs when BGCI launched in 2018. Accordingly, he says that it is inevitable that time plays a very important role. According to the economist, “Bitcoin’s decline preceded the Federal Reserve pivots. This points to the importance of crypto money’s leading indicator nature. “It could also highlight what might be needed to revive liquidity.”
In summary, the market analysis at Kriptokoin.com underlines the vulnerability of the crypto market to broader economic trends. On the other hand, it indicates a cautious outlook with the potential for a longer-term recession phase.
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