The crypto market has experienced a turbulent week following the SEC regulatory clampdown and Bloomberg Intelligence’s senior macro strategist Mike McGlone has shared his thoughts on Bitcoin and the bearish sentiments that have overwhelmed the markets in the past few days.
He believes that Bitcoin is ultimately poised to face its first US recession.
This is in stark contrast to the widely held belief that Bitcoin is designed to act as a hedge against traditional financial systems during a recession. Mike McGlone suggests that Bitcoin is not only vulnerable to such circumstances but may already be heading towards a recession itself.
‘Maturing #Bitcoin vs. Recession, Fed, Weak Technicals – Born of the financial crisis, Bitcoin may face its first US #recession, and performance implications appear to be leaning unfavourably toward the end of 2Q. Bloomberg Economics’ view for an “ugly” 2H may tilt risk…,” he tweeted today.
At its current price, both proponents and critics of Bitcoin may find it challenging to align with McGlone’s pessimistic view of an unfavourable outcome by the end of Q2. Despite facing regulatory scrutiny, security breaches, and the downfall of certain cryptocurrency entities, many people would argue that Bitcoin has demonstrated resilience over time, evidenced by its robust support around the $25 to $26k range.
Gold vs Bitcoin in recession
In the same post, McGlone shared an insightful infographic that questioned the possibility of bitcoin outperforming gold in a recession.
As the infographic subtly suggests, gold is often favoured in times of uncertainty as a reliable option due to its long-standing track record, while digital assets like Bitcoin which have not yet experienced a full-scale recession are seen as unpredictable and relatively novel. The tides could however change – or maybe not. The Bitcoin-to-Gold ratio chart shows an increase in the ratio of the price of one Bitcoin to the price of one ounce of gold in the past six years. Since 2017, the ratio has approached a level of approximately 15x. This suggests that the value of one Bitcoin has grown approximately 15 times higher than the value of one ounce of gold in this duration.
Interpreting this indicator would depend on individual perspective. Overall market sentiments could also help in obtaining more clarity because while Bitcoin proponents may argue that Bitcoin’s value surpassing gold indicates its potential as a superior store of value and a more lucrative investment opportunity, gold maximalists may interpret it as an indication that Bitcoin is overvalued relative to gold and may consider it a potential selling point.
The final part of the infographic cautioned about the actions of the Federal Reserve and their potential impact on the economic forecast, suggesting that smaller and riskier cryptocurrencies could face adversity.
However, it emphasised that Bitcoin, being more established and resilient, is expected to endure and maintain its long-term value.