Bloomberg’s macro strategist Mike McGlone says Bitcoin (CRYPTO: BTC) will likely face a big test in the second half of 2023.
In a tweet on Thursday, McGlone said that, after a strong performance in the first half of the year, BTC will likely have to endure harsh recessionary conditions in the next six months.
#Bitcoin‘s 84% gain in 1H was about double that of the Nasdaq 100 and consistent in annual volatility (risk-adjusted). It’s 2H that may define the benchmark #crypto as a high-beta version of the #stockmarket, or for its potential to be digital #gold in a world going that way. pic.twitter.com/qoIcuuH91P
— Mike McGlone (@mikemcglone11) July 6, 2023
“Bitcoin’s 84% gain in 1H was about double that of the Nasdaq 100 and consistent in annual volatility (risk-adjusted). It’s 2H that may define the benchmark crypto as a high-beta version of the stock market or for its potential to be digital gold in a world going that way,” he said.
McGlone predicted that the stock market will start to decline and that Bitcoin will have a chance to prove itself as a store of value, or “digital gold,” by not dipping alongside equities.
Midyear Outlook: Cryptos – The stock market continuing to post gains may chip away at the foundation for #cryptos. That the Bloomberg Galaxy Crypto Index dropped in 2Q despite the sharp bounce in the Nasdaq 100 Stock Index suggests divergent weakness for the crypto market. pic.twitter.com/dLAq1Axpsh
— Mike McGlone (@mikemcglone11) July 6, 2023
However, McGlone warned that, while the Federal Reserve was quick to ease monetary policy in past recessions, the central bank may be reluctant to do so this time due to high inflation.
“Our bias is somewhat in the middle. We view a true test of Bitcoin is likely to come when the stock market enters a bear market at some point, typical in US recessions,” McGlone added.
“During the two major economic contractions since the start of the millennium, drawdowns of about 50% in the S&P 500 were accompanied by substantial central-bank easing. That may have changed,” he added.
The macro strategist also pointed out that the Fed is unlikely to ease due to stubborn inflation. McGlone said, “Our graphic shows Bitcoin hovering at the $30,000 pivot but trailing the Nasdaq’s 2Q rush.”
McGlone additionally tweeted that a weakening crypto market was already exposed during the year’s second quarter as equities gained while top digital assets declined.
“The stock market continuing to post gains may chip away at the foundation for cryptos. The Bloomberg Galaxy Crypto Index dropped in 2Q despite the sharp bounce in the Nasdaq 100 Stock Index, suggesting divergent weakness for the crypto market. A 2% drop in the Bloomberg Galaxy Crypto Index (BGCI) in 2Q vs. the 15% gain for the Nasdaq 100 Stock Index demonstrates relative crypto weakness,” he said in the tweet.
Produced in association with Benzinga
Edited by Saba Fatima and Newsdesk Manager