On October 2nd, Mike McGlone, Commodity Strategist at Bloomberg, took to social media (formerly known as Twitter) to express his worries about the current state of the crypto market. Despite Bitcoin’s (BTC) recent surge, McGlone highlighted an alarming trend and suggested the possibility of a cryptocurrency recession.
McGlone looked into the concept of “positive beta vs. negative liquidity” and its effects on the crypto market. The Bloomberg Strategist assumed that the weak performance seen in the third quarter of 2023 could either be a minor setback in the recovery or a sign of an impending recession, the latter being more probable due to the fact that most risk assets showed gains in 2023, only to roll over into the new quarter.
McGlone also drew attention to the actions of central banks worldwide, noting that many are tightening their monetary policies despite signs of contraction in the United States and Europe. He added that the ongoing property crisis in China could also have deflationary implications, and that the Bloomberg Galaxy Crypto Index’s (BGCI) poorer performance could be reflecting the changing conditions of an asset class that has done well in a zero-interest-rate environment.
The strategist mentioned the drops in Bitcoin’s price preceding Federal Reserve (Fed) pivots, indicating that cryptocurrencies could be leading indicators for broader market liquidity. McGlone claimed that a revival of liquidity may be necessary to support the crypto market.
In addition to McGlone’s prediction, increased regulatory scrutiny and the implementation of stringent regulations by governments and regulatory bodies can have a significant impact on the cryptocurrency market. The United States regulatory bodies have been actively cracking down on the crypto market, causing delays in what was expected to be a bullish run.
Moreover, economic factors also contribute to concerns about a potential recession in the digital asset ecosystem. Cryptocurrencies are connected with the broader economic landscape, meaning global recessions, monetary policy changes, inflation, or deflation can affect the crypto market, potentially resulting in a recession.
On the other hand, some view the biggest cryptocurrencies as a safe haven during considerable declines in the world’s biggest economies. Bitcoin maximalists, including “The Bitcoin Therapist,” with the aid of Artificial Intelligence (AI), have identified key factors necessary for Bitcoin and the overall market to achieve remarkable growth; such factors include mass adoption, global economic uncertainty, institutional investment, limited supply, increased transaction volume, technological improvements, regulatory clarity, positive market sentiment, halving events, and a global currency crisis.
The strategist’s remarks demonstrate the cautious sentiment surrounding cryptocurrencies despite recent positive movements in Bitcoin’s price. McGlone’s analysis suggests that the crypto market may face significant headwinds due to changing economic conditions, central bank policies, and potential liquidity challenges.
