Bloomberg’s senior commodity strategist Mike McGlone says a new deflationary period may be arriving to the financial landscape, from which Bitcoin (BTC) and gold could benefit.
The analyst tells his 47,700 Twitter followers that plummeting risk-on assets may evolve into a deflationary phase that boosts the flagship cryptocurrency, the yellow metal and US bonds.
“Too Hot Stocks vs. Maturing Bitcoin? Plunging risk assets in 1H [first half] are taking away inflation at a breakneck pace, which may translate into pre-pandemic deflationary forces resurfacing in 2H [second half]. Primary beneficiaries of this scenario may be gold, Bitcoin and US Treasury long-bonds.”
As Bitcoin continued dipping over the weekend, McGlone predicted that this week would see even more declines in risk assets. He says the big declines could reduce the need for the Federal Reserve to maintain its stance on monetary tightening.
“Down over 10% on Saturday, Bitcoin pointing to a big risk asset decline week. Feds 75 bps [basis points] hike may be the last, risk asset deflation doing the tightening for them. 1929ish – aggressive rate hikes despite plunging stock market, global GDP and consumer sentiment.”
Last week, the Bloomberg analyst said that the $20,000 level for Bitcoin could be the new $5,000.
During the 2018 bear market, the $5,000 price area served as support for Bitcoin for about a year. In 2020, the $5,000 level also acted as support for Bitcoin even though BTC briefly breached the area a couple of times.
“$20,000 Bitcoin may be the new $5,000 – The fundamental case of early days for global Bitcoin adoption vs. diminishing supply may prevail as the price approaches typically too-cold levels. It makes sense that one of the best-performing assets in history would decline in [the first half of 2022].”
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