Bloomberg Intelligence senior commodities strategist Mike McGlone said that high equity valuations and expectations that the Fed may raise interest rates again are creating strong sell signals for Bitcoin ($BTC).
McGlone noted that Bitcoin’s performance over the past five years has been roughly on par with the S&P 500 index, but $BTC has experienced approximately three times higher volatility.
McGlone described Bitcoin as an extremely volatile and speculative digital asset, noting that $BTC exhibits a high correlation with the stock market and has to compete with millions of other crypto assets. He argued that, from a risk and portfolio management perspective, Bitcoin presents a negative picture because it offers similar returns to the S&P 500 while carrying approximately three times the volatility.
According to McGlone, Bitcoin, which emerged after the 2009 global financial crisis, could lead the market during a potential downturn, just as it did during the rise in risky assets. The analyst pointed to three key factors that increase the downside risks for Bitcoin: $BTC encountering resistance around $80,000 during its recent rise, the pricing in of approximately 70 basis points of Fed interest rate hikes over the next year in futures markets, and the S&P 500 index being at significantly higher levels compared to its 200-week moving average.
McGlone noted that Bitcoin tends to move strongly with the S&P 500, especially during periods of decreased market risk appetite, and therefore considers $BTC a high-beta asset that follows the stock market.
McGlone also raised a rather sharp long-term bearish scenario. According to the analyst, Bitcoin could move towards the $10,000 level, which has acted as a critical zone many times in the past. One of the key factors that could trigger such a scenario is a sustained decline of approximately 20% in the S&P 500.
However, McGlone added that for this negative scenario to become invalid, Bitcoin needs to decouple from the stock market and consistently demonstrate strong performance. According to the analyst, $BTC’s ability to maintain its strength, especially in the face of a potential decline in the S&P 500, could support the thesis that Bitcoin is no longer just a high-beta risk asset.
*This is not investment advice.
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