In a recent tweet, Mike McGlone, senior commodity analyst at Bloomberg Intelligence, cautions that cryptocurrency investments, which are notorious for their volatility, provide the worst danger in the case of a recession.
McGlone asserts that the United States is unlikely to avoid an economic slump by year’s end, despite the fact that Bitcoin is the cryptocurrency that causes the fewest worri
As a result of an impending recession, central banks may turn to adding more liquidity to the system, a move that often causes risky assets to struggle and interest rates to drop. The expert also expects a detrimental effect on stocks that have recovered.
On the basis of the historical correlation between liquidity and risk assets, McGlone makes his prognosis, citing a notable decline in liquidity by the end of the first half of 2023.
He says that this may portend the long-expected recession’s approach, which would be detrimental to both cryptocurrencies and the equities that have recovered. The forecast is made against a backdrop of a hostile Federal Reserve, which, according to Bloomberg, is more likely to keep raising interest rates.
A fascinating comparison between the performance of Bitcoin, the so-called “digital gold,” and that of actual gold during the 2008 financial crisis is made by the strategist.
He points out that before it recovered, gold saw a dip of almost 30% from its high. It follows from this that Bitcoin may perhaps take a similar course in the second half of 2023. Despite the yield curve’s chance of a recession for the New York Federal Reserve being at its highest level since 1982, Bitcoin is now on the rise.
The effect of these economic factors on the price of Bitcoin is yet unknown. Investors, especially those with a high risk tolerance, may still consider any falls as possible purchasing opportunities despite the cautions about potential hazards.
