Bitcoin’s canary in a coal mine may be worrying for most investors but, most definitely not for Bloomberg’s Mike McGlone.
In a May report published midweek, the senior commodity strategist at Bloomberg called for calm despite markets’ continued bleed under the reels of macroeconomic headwinds.
Bitcoin Beating The Ebbing Tide
Despite giving back over 50% in gains, McGlone noted that Bitcoin and other cryptocurrencies were fast gaining an edge even as the tide goes out on risk assets.
“The process of increasing bitcoin and crypto adoption, institutional involvement and declining volatility –vs- most conventional assets is gaining momentum at the start of May,” the report read.
According to the report, Bitcoin’s current situation sets out for a turnaround, with the top analyst predicting a trough “when the fed funds futures in a year bottom,” just like the 2018 bottom.
Referring to the chart below, McGlone, flanked by Jamie Douglas, a senior market structure analyst wrote;
“In May 2018, Bitcoin dipped below its 50-week moving average for the first time in three years. The stock index sustained below this mean in November and when it did, the white line in our charts bottomed. We see parallels in 2022.”
Just A Little More Pain
However, despite the report stating that Bitcoin was showing stronger divergent strength in comparison to the stock market in 2022, McGlone warned that Bitcoin may need to take additional pain in the near term for some more enduring upside potential. In the short term, he stated that we could continue to see high volatility with price implications. With continued maturation and adoption, however, he noted that Bitcoin could bottom out just like in 2020, setting up the pace for another bullish run.
As to what could hinder Bitcoin from tapping the $100,000 mark, McGlone blamed the Fed’s steps to tackle the highest inflation in about 40 years.
“Unless risk assets decline and reduce people’s ability to spend on goods and services, the Fed is more likely to ramp up hikes until inflation cools, ” McGlone wrote.
When the current storm is over, hopefully before the end of this quarter, McGlone sees Bitcoin’s price outperforming in the second half of the year or better yet, do a 3x before year-end. He further painted a similar picture for Ethereum noting that it was most likely building a base between $2,000 and $4,000.
As of writing, Bitcoin is trading at $29,146, down over 5% this week while Ethereum is down over 5% to $1,964.