Bloomberg Intelligence senior commodities strategist Mike McGlone said that high equity valuations and expectations that the Fed may raise interest rates again are creating strong sell signals for Bitcoin (BTC).
McGlone noted that Bitcoin’s performance over the past five years has been roughly on par with the S&P 500 index, but BTC has experienced approximately three times higher volatility.
McGlone described Bitcoin as an extremely volatile and speculative digital asset, noting that BTC exhibits a high correlation with the stock market and has to compete with millions of other crypto assets. He argued that, from a risk and portfolio management perspective, Bitcoin presents a negative picture because it offers similar returns to the S&P 500 while carrying approximately three times the volatility.
According to McGlone, Bitcoin, which emerged after the 2009 global financial crisis, could lead the market during a potential downturn, just as it did during the rise in risky assets. The analyst pointed to three key factors that increase the downside risks for Bitcoin: BTC encountering resistance around $80,000 during its recent rise, the pricing in of approximately 70 basis points of Fed interest rate hikes over the next year in futures markets, and the S&P 500 index being at significantly higher levels compared to its 200-week moving average.
McGlone noted that Bitcoin tends to move strongly with the S&P 500, especially during periods of decreased market risk appetite, and therefore considers BTC a high-beta asset that follows the stock market.
McGlone also raised a rather sharp long-term bearish scenario. According to the analyst, Bitcoin could move towards the $10,000 level, which has acted as a critical zone many times in the past. One of the key factors that could trigger such a scenario is a sustained decline of approximately 20% in the S&P 500.
However, McGlone added that for this negative scenario to become invalid, Bitcoin needs to decouple from the stock market and consistently demonstrate strong performance. According to the analyst, BTC’s ability to maintain its strength, especially in the face of a potential decline in the S&P 500, could support the thesis that Bitcoin is no longer just a high-beta risk asset.
