The entire cryptocurrency market had a rocky start to 2022. Bitcoin hit a three-month low as global markets continued their New Year’s selloff due to different factors. Ethereum fared even worse in early 2022, down almost 18% following hawkish Federal Reserve meeting minutes.
Macroeconomic factors to save
Mike McGlone, Bloomberg’s senior commodity strategist published a report to highlight bullish scenarios concerning two cryptos despite the big bear. He outlined a few factors that could supplement BTC and ETH to their bullish trajectory.
According to the executive, major cryptocurrencies might have a relative advantage over other investment classes. Here’s why:
“Crypto assets may have a lot going for them as US midterm elections approach, notably versus inflation-related commodities. Typical demand and supply elasticity, and crude prices buoyed by the risk of war in Ukraine, are strong catalysts to refresh oil’s enduring bear market. It’s the opposite for Bitcoin and Ethereum.”
The report noted that the elasticity of supply was negative for both major cryptos and prices fell in bull markets. Additionally, inflation concerns put pressure on politicians, while much of the potential output of commodities in the United States was constrained by regulations. McGlone said:
“We expect U.S. policymakers will embrace cryptos with proper regulation and ETFs for these reasons: dollar dominance, jobs, votes, lots of revenue (tax) and — most importantly — it’ll run counter to China’s antipathy.”
Compared to the “most important” product
The report cites “crude oil” as the most important product. However, “rules of elasticity of supply and demand and adoption of breakthrough technology” could support crypto price appreciation against commodities.
“Bitcoin is gaining traction as a benchmark global digital asset, while oil is being replaced by decarbonization and electrification.”
The graphic below highlights the collective narrative.
The rapidly advancing and more volatile Bloomberg Galaxy Crypto Index (R1) hiked significantly compared to Bloomberg Commodity Index Total Return (L1).
McGlone previously reiterated a similar long-term bullish narrative regarding BTC and ETH. He had noted that both crypto assets were still in their early days of adoption as they flashed long-term health signs.
What metrics say
On-Chain metrics too support this bullish run for both, Bitcoin and Ethereum. According to Glassnode, a data analysis platform- Bitcoin’s Liveliness showcased a preference for HODLing, rather than spending.
Apart from this, ETH’s metrics such as ‘Non-Zero Addresses‘ as well as ‘Number of Addresses holding 10+ coins‘ reached ATHs.
