Bloomberg Intelligence senior commodity strategist Mike McGlone has warned that “cryptocurrencies may be facing their first real downturn.” The Fed’s tightening despite the risk of a recession “could be a major headwind for most risk assets, especially cryptocurrencies,” he added.
“Cryptocurrencies may be facing their first real downturn”
Bloomberg Intelligence (BI), the research arm of Bloomberg, released its February 2023 crypto outlook last week. BI Senior Commodity Strategist Mike McGlone tweeted on Sunday:
Cryptocurrencies may be facing their first real downturn, which usually means lower asset prices and higher volatility.
“The last significant economic contraction in the US, the financial crisis, led to the birth of bitcoin, and the possible economic restart that is coming may mark similar milestones,” he added.
Regarding “how much price pain will be before long-term gains resume,” the report details: “Our chart shows the Nasdaq 100 on par with (bitcoin’s) 200-week moving average, relatively high. based on the history of US recessions.” crafting:
We do not expect the crypto market to be saved if the tide of risky assets continues to recede.
Fed tightening ‘could be a major hurdle’ for cryptocurrencies
“Central bank actions have lagged shocks and most risk assets fall in recessions. That could spell trouble for cryptocurrencies, which are among the riskiest,” Bloomberg Intelligence noted. “The low point for cryptocurrencies may have come with the demise of FTX, but a scenario more like the collapse of Lehman Brothers is also possible, where the low point was much lower about 6 months later.”
The report continues:
Fed tightening despite recession risk could be a major headwind for most risk assets, particularly cryptocurrencies. Buy and hold strategies can benefit at the expense of more speculative and leveraged ones, subject to the increased volatility typical of bear markets.
“The pandemic was a huge disruption that can shape markets for years. It unleashed the biggest fiscal and monetary bomb in history, and that is still being dumped,” the report added. “Risk assets typically bottom out long after the Fed first eases, which is still pretty far back in early February.”
Do you agree with Mike McGlone and Bloomberg Intelligence? Let us know in the comments section.
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