The cryptocurrency market is currently experiencing its first macroeconomic contraction, according to senior commodity strategist at Bloomberg, Mike McGlone.
In a recent analysis, McGlone suggests that cryptocurrencies could be “facing their first real recession” which means lower asset prices and higher volatility.
This is reminiscent of the last significant US economic contraction, the financial crisis, which gave rise to the birth of Bitcoin.
Comparing the historical performance of crypto and the stock market, McGlone pointed out that “a key question is how much price pain will there be before longer-term gains resume.”
He highlighted that in 2022, the Nasdaq 100 bottomed at almost 70% below its 200-week moving average and around a 40% discount in 2009. He added that the crypto market may not be spared if the risk-asset tide continues to recede.
However, in the unlikely scenario of a soft landing, the Bloomberg Galaxy Crypto Index appears poised to resume beating most equity indexes.
Earlier, McGlone shared his views on the future of crypto, admitting he was not yet bullish on digital assets in the short term. However, he believes that the flagship decentralized finance (DeFi) coin could reach six figures in the next couple of years.
Another expert, Robert Kiyosaki, author of the best-selling personal finance book “Rich Dad Poor Dad” warned of a rough landing as “bad news, bankruptcy, unemployment, [and] homelessness” were soaring. He added that the good news is that there are “bargains everywhere, gold, silver, Bitcoin priceless.”
Investors who are considering taking advantage of the low prices during a recession to purchase cryptocurrency are advised to weigh the risks and benefits and carefully plan investment strategies.
It is important to seek guidance from trusted sources like Finbold’s guide before making any investment decisions.