Mike McGlone, Senior Macro Strategist at Bloomberg Intelligence, discussed in a Twitter post the state of the cryptocurrency market, particularly Bitcoin, and its potential implications for the broader economy. According to McGlone, several key factors are at play.
First, he pointed out that cryptocurrencies, often referred to as “Cryptos,” have matured during a unique period characterized by zero-interest-rate policies (ZIRP). However, these policies are now undergoing a rapid reversal, which could have significant consequences for cryptocurrency prices.
Despite the anticipation of US spot exchange-traded funds (ETFs) approval and a thriving stock market, Bitcoin has experienced a decline of approximately 15% in the third quarter up to September 6. McGlone suggested that this decline might be a noteworthy signal.
Being a 24/7 traded cryptocurrency, Bitcoin could potentially serve as a leading indicator of a substantial economic reset. This reset could be related to the unprecedented surge in liquidity followed by a sharp decline, as reflected in Bloomberg Economics’ prediction of a 100% probability of a US recession within the next 12 months. Additionally, economic growth in China and Europe is showing signs of deterioration.
Traditionally, recessions are associated with a decrease in the value of risk assets and central bank interventions aimed at easing economic pressures. While central bank easing may seem distant in some regions, such as the United States, China appears to be an exception.
Furthermore, McGlone noted that the Bloomberg Galaxy Crypto Index appears to have encountered resistance at its 2017 peak, suggesting potential limitations to the cryptocurrency market’s growth.
The crypto market’s recent performance, particularly that of Bitcoin, is raising questions about the broader economic landscape. With the reversal of zero-interest-rate policies, deteriorating economic indicators, and the potential for a severe economic reset, the crypto market may offer insights into the evolving global financial situation.
Diverse Bitcoin Community Reactions
The cryptocurrency community has been actively discussing the recent insights shared by Mike McGlone, and opinions within the community appear to be quite diverse. One commenter pointed out that risk assets have experienced significant declines over the past 18 months, suggesting that the market has absorbed much of the impact of changing economic conditions.
They questioned whether high-interest rates are sustainable in the long run, highlighting the forward-looking nature of financial markets. The commenter specifically mentioned the looming challenge of managing $7 trillion in maturing debt under these higher interest rates and expressed skepticism about the sustainability of such rate levels. On the other hand, there was some critical voice within the community expressing disappointment with Mike McGlone’s analysis.