Mike McGlone, senior macro strategist at Bloomberg Intelligence, warned that Bitcoin (BTC), the largest cryptocurrency by market cap, could drop to $7,000, a price not seen since 2020. This prediction by McGlone is based on his analysis of current trends and historical price movements in the cryptocurrency market.
McGlone shared a post today. in the tweetHe pointed out that Bitcoin has grown relatively 4-fold since the Federal Reserve began expanding its money supply during the market crash initiated by COVID-19.
The analyst added that with the drastic drop in liquidity and the increase in rates, it is still possible for Bitcoin (BTC) to bounce back on the rally it started at around $7,000. If this prediction comes true, the leading cryptocurrency will experience a collapse of about 75%.
According to the famous strategist, the fact that the Federal Reserve continued to increase interest rates in the first half despite falling commodities and producer prices may herald the potential for deflation for risky assets:
“Bitcoin’s boom behind liquidity and patterns of collapse as liquidity fades are tilting our directional bias for BTC towards respecting the downward sloping 52-week average. The Fed’s double tightening despite the bank-run may show the central bank’s determination. Falling copper and cryptocurrencies seem to be heeding the warning and are in significant contrast to the resilient equity market.”
However, McGlone said in a new interview with Scott Melker that he does not support the idea that Bitcoin can still become a risk-averse asset like gold under current financial conditions. The strategist added that crypto cannot be a risk-averse asset until it diverges larger than equities.
“Gold is a decidedly risk-averse asset. I am very optimistic about gold and at some point Bitcoin. The problem in my mind is that all risky assets went down last year and all risky assets went up this year. We’ve seen little hints of Bitcoin’s divergent strength. But we got to see the big one. (…)
Let’s look at the realities of Bitcoin. Just before the massive liquidity surge in 2020, the average price was $7,000. Okay, so it came out to $60,000. And now we’re at $27,000. Still 4 times the price. We still have some risk of reverting to the average, so the way I look at it is the kind of market where we shouldn’t stay long in any risky asset.”
You can follow the current price action here.