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Bloomberg Intelligence’s senior commodity strategist Mike McGlone has warned that “cryptos could be facing their first real recession.” Federal Reserve tightening despite the risk of a recession “could be a primary headwind for most risk assets, especially crypto,” he added.
Bloomberg Intelligence (BI), the research arm of Bloomberg, published its crypto outlook for February 2023 last week. BI’s senior commodity strategist Mike McGlone tweeted on Sunday:
Cryptos may be facing their first real recession, which usually means lower asset prices and higher volatility.
“The last significant US economic contraction, the financial crisis, led to the birth of bitcoin, and the possible upcoming economic reset could mark similar milestones,” he added.
As for “how much price pain there will be before long-term gains resume,” the report describes, “our chart shows the Nasdaq 100 at parity with [bitcoin’s] 200-week moving average, relatively high based on the history of US recessions,” elaborates:
We do not expect the crypto market to be spared if the wave of risky assets continues to subside.
“Central bank actions have delayed effects, and most risk assets fall into recessions. That could spell trouble for cryptos, which are among the riskiest,” Bloomberg Intelligence said. “The crypto low may have come with FTX’s demise, but a more related scenario with the collapse of Lehman Brothers is also possible, with the bottom coming much lower about 6 months later.”
The report continues:
Fed tightening despite the risk of recession could be a primary headwind for most risk assets, especially crypto. Buy-and-hold strategies may have advantages at the expense of the more speculative and leveraged, subject to increasing volatility typical in bear markets.
“The pandemic was a major disruption that could affect markets for years. It triggered the biggest fiscal and monetary pump in history, and it’s still in the process of dumping,” the report says. “Typically, risk assets bottom out well after the Fed’s initial easing, which remains quite distant at the beginning of February.”
Do you agree with Mike McGlone and Bloomberg Intelligence? Let us know in the comments section below.
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