- Mike McGlone, an analyst at Bloomberg, published a report titled “Profit may take some pain”, where he assured that Bitcoin could recover strongly once traditional stocks bottom.
- McGlone notes that while the US Federal Reserve (FED) tightening is expected to determine the direction of the stock market, Bitcoin could become a “wild card” for the trend.
- Mike McGlone believes that the Fed’s tightening could be solidifying the fundamentals of cryptocurrencies.
All markets have suffered the consequences of a series of macroeconomic conditions, neither cryptocurrencies nor traditional stocks have been exempt, that is why Mike McGlone, an analyst at Bloomberg, seeks precisely to respond and understand where the current market is headed in His article “Gain may require some pain” ,
In your post, McGlone explains that while the US Federal Reserve (FED) tightening is expected to determine the direction of the stock market, Bitcoin could become a “wild card” for the trend.
The influence of the Fed in the market
While the FED kept rates close to zero, the stock and crypto markets soared. Basically low rates made stocks or risky assets more attractive compared to bonds. However, interest rates close to zero are a thing of the past.
Inflation in the US economy has spiked to the highest annual rate in some 40 years, at 9.1% in June. So how do you curb inflation? Well the Fed is resorting to increases in the interest rate that leads to a reduction in liquidity in the financial markets.
In this way, increases in interest rates have a key explanatory role in what the markets are experiencing. These quantitative adjustments are a contractionary monetary policy tool to reduce the level of money supply and the liquidity of the economy, which can translate into lower spending in the markets.
The question everyone is asking now is:How far will interest rate increases go? What will happen to the stock and crypto markets?
Bitcoin has the ability to bounce back strongly
Mike McGlone believes that the Fed’s tightening could be solidifying the fundamentals of cryptocurrencies. Certainly the fact that there is an expectation of more restrictive policy has been a huge headwind for risk assets, especially cryptos.
However, the Bloomberg analyst assures that it is only a matter of time until the FED changes its current monetary policy and, at that time, Bitcoin could be the main beneficiary.
Likewise, McGlone notes that volatility in the crypto market has decreased as participation and adoption have increased. This happens at the same time that supply decreases and, by economic rules, this implies an increase in price over time.
In fact, McGlone assured that Bitcoin is still in a bull market, only that it is currently selling at a discount but that could change.
“Bitcoin and crypto will continue to do what they do best, outperforming most traditional assets with decreasing volatility”McGlone assured in a interview at Bell Media. There is no telling exactly when the Fed’s quantitative tightening will end. In August an article from Bloomberg estimated it could happen sometime in 2023.
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