Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence, stated that high stock valuations and expectations that the Fed may raise interest rates again create strong sell signals for Bitcoin ($BTC).
McGlone noted that Bitcoin's performance over the past five years has roughly tracked the S&P 500 index, but the volatility of $BTC has been approximately three times higher.
McGlone characterized Bitcoin as an extremely volatile and speculative digital asset, pointing out that $BTC exhibits a high correlation with the stock market and is forced to compete with millions of other cryptocurrencies. He argued that from a risk and portfolio management perspective, Bitcoin paints a negative picture, as it offers returns similar to the S&P 500 index but with about three times the volatility.
According to McGlone, Bitcoin, which emerged after the 2009 global financial crisis, could lead the market during a potential downturn, as it did during the rise of risk assets. The analyst pointed to three key factors increasing the downside risks for Bitcoin: resistance around the $80,000 level during the recent rally, futures markets pricing in approximately 70 basis points of Fed rate hikes over the next year, and the S&P 500 index being significantly higher than its 200-week moving average.
McGlone noted that Bitcoin shows strong performance aligned with the S&P 500 index, especially during periods of declining market risk appetite, and therefore he considers $BTC a high-beta asset following the stock market.
McGlone also presented a rather sharp long-term bearish scenario. In the analyst's view, Bitcoin could approach the $10,000 level, which has served as a critical zone multiple times in the past. One key factor that could trigger such a scenario is a sustained approximately 20% decline in the S&P 500 index.
However, McGlone added that for this negative scenario to be invalidated, Bitcoin needs to decouple from the stock market and consistently demonstrate strong performance. In the analyst's opinion, the ability of $BTC to maintain its strength, especially in the face of a potential decline in the S&P 500 index, could confirm the thesis that Bitcoin is no longer just a high-risk beta asset.
*This is not investment advice.
end-content
