Economic Expert Predicts Recession and Bitcoin Correction Amidst Liquidity Crunch
Bloomberg Intelligence's macro strategist, Mike McGlone, has raised concerns about an impending liquidity crunch that could lead the economy towards a recession and subsequently trigger a correction in the Bitcoin (BTC) market.
During a recent conversation with crypto influencer Scott Melker, McGlone shared his perspective that the Federal Reserve is likely to maintain a hawkish stance throughout the remainder of 2023 to counter inflation. According to McGlone, this stance might contribute to a decline in assets with risk exposure, including Bitcoin.
McGlone expressed his astonishment at the current situation, describing it as an unprecedented withdrawal of liquidity following a period of substantial influx. He emphasized the relevance of data in supporting his analysis.
In McGlone’s view, some economists have revised their predictions about the timing of a potential US recession due to the Federal Reserve’s aggressive interest rate hikes. While many had initially anticipated an earlier recession, these economists now foresee it happening by the end of the year.
McGlone attributed this potential recession to the impact of high-interest rates, which could influence the decrease of bond yields and stock market values.
Drawing parallels from history, McGlone referred to instances such as the 1920s when an excessive supply of liquidity was generated, leading to unintended consequences.
He highlighted the current negative money supply and producer price index (PPI) year-over-year figures alongside the ongoing rate hikes by the Federal Reserve. McGlone emphasized that these factors will cascade through the economy, with no indication of the Fed changing its course.
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Anticipating the future scenario, McGlone projected that once the stock market experiences a decline, other indicators like bond yields are likely to follow suit. He pointed out that the key question is what will put a halt to this downward trend. Even though some economists have admitted to slight inaccuracies in their earlier predictions, they still stand by their forecast of a recession by year-end.
Looking ahead to December, with the recession taking hold, McGlone envisioned a situation where hopes for Federal Reserve intervention might clash with persistent inflation concerns. He noted that such a situation hadn’t been witnessed in a considerable time.
In terms of Bitcoin, McGlone foresaw a potential collapse in its value later in the year, corresponding to a decline in liquidity. He saw Bitcoin’s performance as an indicator of the larger economic sentiment and cited its recent inability to maintain a price above $30,000 as a reflection of his expectations.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
