Crypto Future in Jeopardy
Bloomberg’s lead strategist of its Intelligence branch, Mike McGlone, has developed doubts over cryptocurrencies’ future.
In its report for the month of February 2023, authored by McGlone, Bloomberg Intelligence has made a concerning prediction regarding the crypto future.
After the report publication, Mcglone was seen on Twitter opined that the ‘crypto industry is going to witness its first ever recession phase’.
What he was predicting meant that if an event of ‘recession’ is going to happen in crypto, then there shall be two things obvious. The first he explained was that the values of cryptocurrencies would fall to frightening levels.
Secondly, he opined that the market would then be highly volatile meaning thereby that ‘certainty’ would vanish completely.
The last time the world had seen a worldwide recession was witnessed in 2008 whose effects took 8 years to end.
The birth of Bitcoin was natural so as to allow the world to resort to an alternative when the traditional financial sector is in crisis.
The world, however, overcome 2008’s deep recession phase and has once again been brought to a situation where recession is already on.
Does Recession Impact Crypto Economy
It was a long-appreciated argument that macroeconomic conditions or global financial crises do not impact the crypto economy. It was thought that the crypto industry was free from financial crises emerging in the conventional sectors.
This argument grew weak when post-pandemic effects came into play. First of all, global monetary regulators such as US Federal Reserve started to increase inflation and interest rates at terrifying levels.
For saving the global economies from falling, excessive currency notes were printed which led to excessive debts for the public.
Meanwhile, post-pandemic effects went into crypto markets and ended the prolonged crypto rallies which though had begun because of the same pandemic.
It is in this background, McGlone is convinced that a recession will occur in the crypto markets as well. He is also convinced that the recession has already started to show its presence in the market but stealthily.
Tightened Monetary Policies Will Kick off Recession
McGlone is of the view that a recession in crypto will be introduced through the tightening of monetary policies by the US Federal Reserve.
He believes that worldwide central banks are currently delaying the impacts because they know risky assets markets would go into recession.
However, they cannot hold them back for an indefinite time and soon the wall would be breached. Since cryptocurrencies are also regarded as risky assets therefore their markets would go into recession, explained McGlone.
He argued that ‘FTX’s contagion is a tip of the iceberg which is nothing as compared to what is coming next’.
McGlone referred to the example of ‘The Lehman Brothers’ downfall whose massive impacts were only revealed after six months.
He further suggested that the recession risk is there which will be further fueled by the tightening of monetary policies.
He opined that the crypto market would initially benefit from that but volatility in the market would be excessively high.
McGlone warned that in the future Bitcoin may be seen as a burden rather than a tangible asset when the first recession would prevail.