Bloomberg strategist Mike McGlone warns that one catalyst could bring down Bitcoin (BTC) and crypto prices
Bloomberg Intelligence senior macro strategist Mike McGlone says a catalyst could drive Bitcoin (BTC) to the downside.
In a new crypto analysis, McGlone says that if the Federal Reserve continues to raise interest rates to lower inflation despite the risk of a recession, it could put downward pressure on risk assets like Bitcoin.
“Fed tightening despite the risk of recession could be a primary headwind for most risk assets, especially crypto. Buy-and-hold investors can warrant protective insurance against the potential for the bear market not to be over.”
McGlone also questions whether crypto and stocks could fall lower than they have during the bear markets of 2022.
“What if crypto, stocks have yet to see their lows? Crypto and stock prices have jumped, which could leave them vulnerable to resuming 2022 downward trajectories. The stock market could be one of the world’s most powerful forces when it falls, and the Fed tightens in the midst of heightened recession risk is a solid headwind.”
McGlone says $25,000 is a key price level for Bitcoin and March could quickly indicate whether the crypto will remain resilient despite the Fed’s tightening monetary policy.
“Risk vs. reward could be tilted towards responsive, tactically focused sellers, with around $25,000 in Bitcoin marking key resistance. Cryptos need to show sustained strength amid concerns that the 2022 level in risk assets may not bottom out.”
The federal funds rate a year ago was zero and is still rising, and markets appear to be underestimating the long and variable lags in monetary policy, which seems good reason to be defensive. Our inclination is simple: Risk assets must prove resilient in early March, as the federal funds rate was zero a year ago and is approaching 5%.
Bitcoin is trading at $23,408 at the time of writing.
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