According to Bloomberg Intelligence’s senior commodity strategist, Mike McGlone, cryptocurrencies known for their extreme volatility, are considered the most high-risk assets during an economic downturn. In a recent tweet, McGlone cautioned that the United States is unlikely to escape a recession by the end of this year.
Amidst an impending recession, central banks may inject additional liquidity into the system, typically leading to struggling risk assets and lower interest rates. McGlone further predicts a negative impact on rebounding stocks.
The strategist’s forecast is rooted in the historical correlation between liquidity and risk assets, pointing out a significant negative liquidity trend observed after the first half of 2023.
Crypto Faces Recession Challenges
According to McGlone, this pattern could signify the arrival of a long-anticipated recession, presenting challenges for both cryptocurrencies and recovering stocks. Notably, this prediction emerges in the face of an unfriendly Federal Reserve, as Bloomberg reports an inclination towards continuing interest rate hikes.
Interestingly, McGlone draws a parallel between the performance of Bitcoin, often referred to as “digital gold,” and physical gold during the 2008 financial crisis.
During that period, gold experienced a drop of approximately 30% from its peak before rebounding. This observation leads to speculation that Bitcoin may follow a similar trajectory in the second half of 2023. Bitcoin continues its upward trend, despite the New York Federal Reserve’s yield curve-based recession probability being at its highest since 1982.
The impact of these economic indicators on the price of Bitcoin remains uncertain, even though there are warnings about potential risks. Nevertheless, investors, especially those willing to take high risks, might still view any market downturns as appealing chances to make purchases.
BTC Market Movement
Bitcoin (BTC) experienced a significant price surge of 27%, soaring from $24,777 on June 15 to a local peak of $31,500 on June 23. As the third quarter commences, BTC surpassed the $31,500 level, strategically targeting buy-stop liquidity and establishing a fresh high at $31,568. However, the cryptocurrency has since retraced by 3.65%.
Currently, Bitcoin’s price is $30,512, potentially signaling the end of its two-week consolidation phase and hinting at a possible downward breakout.
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