Bitcoin’s Upswing: Drawing Parallels with 1929’s Market Highs
Bloomberg Intelligence's senior macro strategist, Mike McGlone, has drawn attention to the remarkable parallels between Bitcoin's decade-long meteoric surge and the stock market bubble of 1929.
McGlone has compared the prevailing high-interest rate environment and the circumstances that precipitated the stock market crash in 1930.
One of the best-performing assets in history and a leading indicator — #Bitcoin — appears similar to the #stockmarket in 1930. Statistician and entrepreneur Roger Babson began warning about elevated equity prices well before economist Irving Fisher proclaimed a "permanently… pic.twitter.com/kKO04h2QoR
— Mike McGlone (@mikemcglone11) August 21, 2023
Supporting his analysis, McGlone has shared a visual representation depicting the peak of the US discount rate in 1929, coinciding with the turning point of the Dow Jones Industrial Average’s 100-week moving average.
The US discount rate pertains to the interest rate imposed on loans extended to banks by the Federal Reserve.
This visual representation further illustrates a significant upswing in the Fed’s interest rate over the past year, mirrored by a downtrend in Bitcoin‘s 100-week moving average.
Drawing a historical analogy, McGlone underlines the resemblance between Bitcoin’s inception and the technological advancements of a century ago, such as electricity, automobiles, air travel, and telephones.
During both eras, groundbreaking technologies emerged alongside Bitcoin’s exponential ascent, all transpiring during sustained low interest rates facilitated by the Federal Reserve.
READ MORE: How Cryptoassets Introduce Vulnerabilities in Developing Economies
In a notable departure from history, McGlone emphasizes that the Federal Reserve Bank of New York began reducing rates in the fourth quarter of 1929 in response to plummeting equity values.
What's Bullish About This? Downtrend, Fed Hiking –
The advent of revolutionary technologies, parabolic price moves, excessive liquidity and speculation are what #Bitcoin has in common with the #stockmarket as it neared the 1929 peak. A big difference is that the #Fed Bank of New… pic.twitter.com/MILaU4YrrI— Mike McGlone (@mikemcglone11) August 21, 2023
Ultimately, McGlone underscores the convergence of factors between Bitcoin’s current trajectory and the conditions leading up to the 1929 stock market zenith. These factors encompass transformative technological innovations, rapid price escalations, rampant liquidity, and speculative fervor.
Nonetheless, he highlights a key divergence: the proactive rate reduction by the Fed Bank of New York in 1929 as equity markets tumbled.
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.
