Bloomberg Intelligence senior macro strategist Mike McGlone thinks Bitcoin’s (BTC) recent price action indicates economic turbulence is ahead.
McGlone tells his 60,000 followers on the social media platform X that Bitcoin is showing bearish divergence against the Nasdaq 100 Stock Index, which may indicate a coming recession.
“Is one of the best-performing assets ever telling us something?
Bitcoin has dropped about 15% in third quarter to September 1st vs. a 2% gain in the Nasdaq 100 Stock Index.
Weakness in the benchmark crypto could be a precursor for a normal stock market drawdown in a recession or simply falling behind.
My bias is the former, notably when considering how far risk assets have come since the financial crisis and what got them to current levels – very low-interest rates.”
He notes that the federal funds futures rate, which records the opinion of investors on where the official federal funds rate will be at the time of contract expiry, suggests additional Fed interest rate hikes are coming.
McGlone also says that Bitcoin’s performance relative to Japan’s Nikkei 225 index is another reason for his bearish outlook on the crypto king.
“Nikkei a Guide for Bitcoin or Vice Versa?
Bitcoin has had a close directional relationship with the Nikkei 225, and recent crypto weakness may portend contagion. That or the benchmark crypto might recover and follow the path of the Nikkei, which reached a 33-year high in June.
Our bias is to heed the leading-indicator inklings of Bitcoin and respect the downward-sloping 100-week moving average.”
McGlone says if Bitcoin can regain the $31,000 price level it would indicate a bullish reversal, but he believes BTC will continue to decline due to the fact that “the Fed and most central banks are still tightening.”
Bitcoin is trading for $25,746 at time of writing, down 0.1% in the last 24 hours.
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