In a recent tweet, Mike McGlone, Bloomberg’s senior commodity strategist, suggested that cryptocurrencies pose the greatest risk in the event of a recession, which apparently, will impact the United States by the end of the year.
On July 12, McGlone took to Twitter to indicate the US will face a severe economic contraction by year-end and explain how digital assets are more prone to susceptibility amidst the downturn. He explained as a consequence of the imminent recession, central banks may resort to injecting more liquidity into the system, a practice that usually results in struggling risk assets and lower interest rates.
Notably Negative Liquidity vs. Bouncing Bitcoin –
Recessions typically portend struggling risk assets and lower interest rates as central banks add liquidity. #Cryptos are tops in risk, with #Bitcoin the smallest worry. It's unlikely the US will avoid economic contraction… pic.twitter.com/E2DriAj7Ud
— Mike McGlone (@mikemcglone11) July 11, 2023
Economic Downturn to Hit Us by Year End
This would adversely affect stock prices that have made a comeback, noting significant negative liquidity at the end of 2023. McGlone argued that these factors could signal the arrival of a long-anticipated recession, which would add to headwinds for both cryptocurrencies and stocks. However, the strategies claimed Bitcoin (BTC) would be the only digital token that would be least impacted in the wake of the economic downturn. McGlone tweeted,
“Recessions typically portend struggling risk assets and lower interest rates as central banks add liquidity. Cryptos are tops in risk, with Bitcoin the smallest worry.”
The Bloomberg analyst bases his prediction on the historical correlation between liquidity and risk assets, suggesting the Federal Reserve seems more inclined to keep raising interest rates. Furthermore, McGlone also compared the performance of BTC and gold during the 2008 financial crisis, explaining that gold saw a decline of about 30% from its peak before rallying.
Recession probability forecast, 2023:
🇮🇳 India: 0%
🇮🇩 Indonesia: 2%
🇸🇦 Saudi Arabia: 5%
🇨🇳 China: 12.5%
🇧🇷 Brazil: 15%
🇨🇭 Switzerland: 20%
🇪🇸 Spain: 25%
🇲🇽 Mexico: 27.5%
🇰🇷 South Korea: 30%
🇯🇵 Japan: 35%
🇷🇺 Russia: 37.5%
🇦🇺 Australia: 40%
🇿🇦 South Africa: 45%
🇫🇷 France: 50%
— World of Statistics (@stats_feed) May 2, 2023
He implied that Bitcoin could also potentially follow a similar trajectory in the second half of 2023. Nevertheless, it seems the impact of these economic indicators on Bitcoin’s price remains uncertain. Although, the largest digital asset has been relatively stable over the past few weeks, bitcoin bears are cautious about the world’s most valuable crypto, given interest rates may continue to rise and regulatory crackdowns on crypto exchanges may limit access for investors.
Market Experts Bullish on Bitcoin (BTC)
On the flip side, several factors such as easing inflation data, BlackRock ETF filing and the Federal Reserve pausing interest rate hikes in June have provided a much-needed optimism to Bitcoin. Moreover, a brief U.S. banking crisis in early 2023 also fueled fears about the safety of the traditional banking system, catapulting BTC prices above $30,000 in April 2023 for the first time in nearly a year.
Recently, Alex Adelman, CEO and co-founder of bitcoin rewards app Lolli, explained, Bitcoin (BTC) is unique compared to other cryptocurrencies because the SEC has repeatedly made it clear the OG cryptocurrency is not a security and is therefore not subject to SEC regulations. He added,
“With persistent interest rate hikes, weakness in the banking sector and debt ceiling concerns, investors see bitcoin now more than ever as a sovereign, safe haven asset that has held strong and steady in the face of market uncertainty.”
Bitcoin Whales and Small Addresses Seize the Opportunity:
Accumulation on the Rise🚀
Bitcoin's price has been consolidating between $29.6k and $31.4k for 18 days, causing mixed emotions among traders. Despite the frustration, the chances of a sudden drop below $29k are… pic.twitter.com/g4oyQDfOSo
— 𝗡𝗲𝗴𝗲𝗻𝘁𝗿𝗼𝗽𝗶𝗰 (@Negentropic_) July 11, 2023
Will Bitcoin Rise or Fall?
It seems Bitcoin bulls have pinned their hopes for a sudden upswing, asserting the bullish trend in BTC prices in 2023 may continue through the end of the year. Nick Rygiel, owner of Ironclad Financial said predicting the future prices of Bitcoin is inherently complex due to the volatile nature of the cryptocurrency space.
However, he specified that in light of recent technological advancements and upgrades to both platforms, the flagship token could continue to see prices rise through the end of 2023. It seems, most market experts are of the opinion the long-term outlook for Bitcoin (BTC) will depend on several unpredictable factors, such as institutional adoption, global usage and regulatory framework.