• Bloomberg Intelligence’s senior macro strategist Mike McGlone warns that Bitcoin (BTC) will likely face a big test in the second half of 2023.
• McGlone believes that a true test of Bitcoin’s potential to be digital gold will come when the stock market enters a bear market.
• He argues that this time around, due to high inflation, the Federal Reserve is unlikely to ease monetary policy.
Bitcoin ‘True Test’ Coming: Warns Bloomberg Analyst Mike McGlone
Bloomberg Intelligence’s senior macro strategist Mike McGlone has warned that Bitcoin (BTC) will likely face a big test in the second half (2H) of 2023. After a strong performance in the first half of the year (1H), he believes that Bitcoin will have to endure tough recessionary conditions during the next six months and prove itself as a store of value or “digital gold” by not dipping along with equities. He also thinks that due to high inflation, this time around, the Federal Reserve is unlikely to ease monetary policy.
Bitcoin Performance in 1H
McGlone tells his 58,800 Twitter followers that Bitcoin achieved an 84% gain in 1H which was about double that of Nasdaq 100 and consistent with its annual volatility (risk-adjusted).
True Test Likely During Bear Market
The macro expert predicts that the stock market will start to decline soon and Bitcoin will have a chance to prove its potential as digital gold in such conditions. He states: “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.”
Cryptocurrency Market Weakness Exhibited During 2Q
According to McGlone, while equities gained during 2Q, top digital assets tracked by Bloomberg Galaxy Crypto Index (BGCI), declined instead – suggesting divergent weakness for cryptocurrency markets. Despite 15% growth for Nasdaq 100 Stock Index, BGCI experienced 2% drop instead – demonstrating relative crypto weakness compared with traditional assets.
In conclusion, it appears that bitcoin may be tested during an economic downturn as seen through past recessions and its current lacklustre performance compared with traditional markets during Q2 2021. It remains unclear whether it can hold up against heavy selling pressure if and when it occurs; however investors should watch out for any significant changes moving forward.