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BTC Mike Glone, senior commodity strategist at Bloomberg Intelligence: High valuations and interest rate hikes send a strong sell signal for Bitcoin.
Mike McGlone, senior commodity strategist at Bloomberg Intelligence, pointed out that the current high stock valuations and the market's widespread expectation that the Federal Reserve may raise interest rates again, these factors together constitute a strong sell signal for Bitcoin (BTC).
McGron notes that over the past five years, Bitcoin has performed roughly in line with the S & P 500, but its volatility is about three times that. He described Bitcoin as an extremely volatile speculative digital asset, pointing out that Bitcoin shows a high correlation with the stock market and needs to stand out among millions of other crypto assets. He believes that from a risk management and portfolio perspective, Bitcoin's prospects are not optimistic because it provides similar returns to the S & P 500 while bearing a volatility risk that is about three times higher.
McGron said that Bitcoin, born after the global financial crisis in 2009, may lead a decline during potential market declines, just as it led the market during risk-asset rises. The analyst pointed out three key factors that increase Bitcoin's downside risks:
- Bitcoin encountered resistance around US$80,000 during its recent rise;
- The futures market has priced the Fed's expectation of raising interest rates at approximately 70 basis points in the next year;
- The S & P 500 is currently significantly above its 20-week moving average.
McGron emphasized that Bitcoin often fluctuates significantly in sync with the S & P 500 index, especially during periods of reduced market risk appetite. As a result, he views Bitcoin as a High-Beta asset that follows the stock market.
In addition, McGron also proposed a rather severe long-term bearish scenario. According to the analyst, bitcoin prices may fall back to the $10,000 level, a range that has served as a key support or resistance area many times in the past. One of the key factors that could trigger such a scenario is a sustained decline in the S & P 500 index of about 20%.
However, McGron added that for this negative scenario to fail, Bitcoin needs to decouple from the stock market and continue to show strong performance. According to the analyst, Bitcoin's ability to remain strong in the face of a potential decline in the S & P 500 index will support the argument that "Bitcoin is no longer just a high-beta risky asset."
The content of this article does not constitute investment advice.
