Bloomberg Analyst Warns Crypto Faces a Lose-Lose Scenario
Mike McGlone stressed that, since 2017, crypto has been performing poorly with increasingly high volatility levels, and that the reason behind this behaviour could be linked to a hawkish turn by the Federal Reserve and an overstretched SPX index valuation.
Key Takeaways
- McGlone warns the crypto market faces a stark future due to poor returns and extreme volatility since 2017.
- A hawkish Fed fighting inflation with 2026 rate hikes threatens the liquidity that fueled past crypto gains.
- Overvalued stocks and unchecked crypto supply create a lose-lose scenario for highly volatile digital assets.
McGlone Warns About Crypto’s Demise As The Fed Turns Hawkish
Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence and a seasoned financial analyst, is predicting a stark outcome for the cryptocurrency market.
On social media channels, McGlone declared that the Bloomberg Galaxy Crypto Index (BGCI) had performed poorly since 2017 compared to the wider financial market, while still managing to be 4 times as volatile.
McGlone uses the BGCI as a proxy for the cryptocurrency market, as the index follows the prices of the top tracked USD-traded digital assets rebalanced each month. At the time of writing, the fund included BTC (35%), ETH (35%), XRP (15.5769%), SOL (10.1678%), ADA (1.3908%), LINK (1.4713%), and XLM (1.3933%).
McGlone stressed that the reason behind this behaviour could lie in the stock market and the recent changes in the Federal Reserve’s stance on interest rates.
He explained that the crypto fund enjoyed its glory days in 2021 following what he called the biggest money pump in history, as significant liquidity was injected into financial markets to deal with the economic effects of the COVID-19 pandemic. The Federal Reserve also maintained a dovish policy, which allowed crypto and other investment options to thrive.
Nonetheless, the financial landscape has changed since then, and now the Fed has turned hawkish again to fight high inflation levels, and it is expected to hike interest rates at least one more time in 2026.
“With US stock-market capitalization stretched to its highest vs. GDP in about a century and vs. public debt in about a quarter-century, stocks going up or down may rank a 10 on a 1-to-10 scale for inflation or deflation,” he assessed.
“Highly correlated with the S&P 500, the BGCI could face a lose-lose, notably due to its much greater volatility. BGCI has survivor bias amid an unchecked supply of cryptos,” McGlone concluded, highlighting that the index had a strong standing amidst the tens of thousands of cryptocurrencies in the market.
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