Bitcoin and Ethereum at Risk of Crash in Looming Deflation – Bloomberg Analyst
According to Bloomberg Intelligence's senior macro strategist, Mike McGlone, the bull run for Bitcoin (BTC) and Ethereum (ETH) may soon come to an end as crypto and risk assets face a potential correction.
On Twitter, McGlone shared a visual that compared the ETH/BTC pair, the NASDAQ, and the money supply of the Federal Reserve. The chart indicated that the ETH/BTC pair might be a leading indicator for risk assets. This suggests that there could be a correction in the stock market and potentially in the crypto market as well.
#Nasdaq Rollover vs. S&P 500 and #Ethereum/#Bitcoin – "The main factor depressing aggregate demand was a worldwide contraction in money supplies." This from former #FederalReserve chair Ben Bernanke's "Essays on the Great Depression" may pertain to current markets. pic.twitter.com/h9G5btxAE6
— Mike McGlone (@mikemcglone11) April 14, 2023
The analyst proposes that the markets may be adapting to a period of disinflation that has been caused by the Federal Reserve’s recent reversal in monetary policy. He clarifies that if risk assets peak, markets may be in the early stages of adjusting to disinflation.
Although it is normal in recessions, the Federal Reserve may not ease its policies as freely as it has in the past. Enduring deflation could be a reciprocal outcome. Therefore, according to McGlone, we cannot solely blame $2,000 Ethereum or $30,000 Bitcoin for this scenario.
During a Yahoo Finance interview, he stated that gold is poised to be a top-performing asset during the deflationary recession he foresees.
McGlone’s optimism about gold is rooted in his observation that many indicators are pointing toward deflationary trends. He thinks that if the stock market turns downwards, this could trigger a surge in gold prices.
Overall, his analysis suggests that the recent bull run in crypto and risk assets may be short-lived. Investors may want to diversify their portfolios to include assets like gold better positioned to perform well during a deflationary recession.