On Monday (19 December 2022), Mike McGlone, a Senior Macro Strategist at Bloomberg Intelligence (Bloomberg’s research arm on the Bloomberg Terminal”), shared his outlook for Bitcoin and Ethereum.

In the latest edition of Bloomberg Intelligence’s “Crypto Outlook” report, McGlone (and the three contributing analysts he worked with on this research) said:

It’s been one of the most severe drawdowns in crypto history, yet the Bloomberg Galaxy Crypto Index (BGCI) is still up about 200% since the end of 2019 vs. 20-60% for gold, the S&P 500, the Bloomberg Commodity Spot index and US money supply to Dec 2. The question is how much worse things can get for the space, overdue to cleanse speculative excesses. Our bias is risk vs. reward, with the BGCI tilted toward resuming its propensity to outperform…

About 70% of the BGCI is Bitcoin and Ethereum, which are notable for definable diminishing supply vs. increasing adoption and demand. Something has to reverse the demand side of that equation, or by the rules of economics, the price should rise over time. A significant dip within an elongated trend is how we expect history to view 2022 in cryptos…

That the drop in the value of the entire crypto market in 2022 to Dec. 2 — about $1.3 trillion — is roughly equivalent to the market-cap fall of two stocks, Amazon and Google, is indicative of cryptos’ nascent stage. The most aggressive Fed tightening in 40 years is a good reason for the macroeconomic ebbing tide, but 2023 may be about which assets come out ahead as central banks pivot. If they don’t flip to easing, the world may tilt more deeply into recession, with repercussions for all risk assets. Our base case is for an elongated deflationary period, with the crypto market, as measured by the Bloomberg Galaxy Crypto Index, coming out ahead.

On 19 December 2022, McGlone stated:

Ethereum’s advances vs. Bitcoin have been unshaken by 2022 deflation in most risk assets and may be gaining underpinnings. At a ratio of about 0.08, the Ethereum/Bitcoin cross rate is the same as in May 2021, when the Nasdaq 100 Stock Index was about 20% higher.

Our graphic shows the trend of the No. 2 crypto outperforming No. 1, which appeared coincident with the rise of risk assets. This year’s 30% drop in the Nasdaq is part of a receding tide, including about a 65% decline in Ethereum to Dec. 16.

Migration into the mainstream is our takeaway, and once the dust settles from some reversion in risk assets amid inflation pressures, Ethereum is more likely to resume doing what it has been — outperforming. Annual volatility in Ethereum is about 1.3x that of Bitcoin.

McGlone gave an interview (released on 6 December 2022) to Daniela Cambone, Editor-at-Large and Anchor at Stansberry Research, “a subscription-based publisher of financial information and software”, during which — according to a report by The Daily Hodl — he said:

“Cryptos have already backed up 80%, and you just don’t want to get too bearish when a thing is down 80%. I think we’re in the final stages of this bear market for cryptos, but it’s not going to be easy. Typically markets don’t just make a V bottom. They have to make it as difficult as possible and the key thing I’ve learned trading in markets, especially bear markets, is they’ll make you lose your hair, they’ll take money from everybody and they have to be volatile and difficult. That’s the key thing...

Remember, this is not a crypto winter. This an everything winter, except for one asset class. Those are commodities. Commodities have to go down. If they don’t, the Fed is going to keep tightening until they do, and so that that’s to me the way I look at it.

Image Credit

Featured Image via Pixabay