Mike McGlone, a Bloomberg analyst has noted that Bitcoin prices may absorb negative impact from Macroeconomic dynamics. He is a senior commodity strategist for the media firm and retained that Bitcoin prices may underperform in comparison to the stock market on account of a risk-adjustment basis during 2024.
It is important to note that risk-adjustment returns indicate the ratio returns with respect to risk exposure within a given duration. The analyst says that bullish influence has strengthened on account of Bitcoin spot ETF listings and the upcoming halving event.
The Role of Macro-Economic Factors
However, he stated that despite the ensuing bullish forces macro-economic factors may offset massive price gains and ATHs for cryptocurrencies in 2024. At the same time, he has noted that the market is leaning against the Federal Reserve’s continuation of reducing interest rates.
He claims that such interjections are ill-advised as they bring more risk to assets such as Bitcoin. He projected that the Fed is unlikely to operate with the same ease as it has retained in the past. One of the main reasons McGlone cited for the Fed’s policy changes is hiking inflation rates from easing.
McGlone was speaking with the journalists at Cointelegraph when he noted that the US economy may undergo recession in 2024. It is important to note that a recession is a decline in GDP for at least two consecutive quarters. He projected that the stock market may generate lower revenues on account of the downturn.
He believes that Bitcoin is one of the top indicators for risk assets which may reflect on its prices. He opines that when the stock and beta markets are underperforming, Bitcoin prices will also continue to fair in the lower price tier.
He also claimed that in the current markets, gold and long-term treasury bonds are going to be the assets that shine through. Another Bitcoin price analysis published by Cointelegraph on 23rd January, 2024 opines that factors such as Mt.Gox bankruptcy, Bitcoin spot ETFs and interest rates are going to serve as bearish forces.
The report suggests that the Bitcoin price decline on 23rd January, 2024 was incited by spot ETF listings. To this effect, there was a 17.5% price decline within 12 days leading up to 23rd January, 2024 resulting in $385 million liquidation of long futures Bitcoin contracts.
The report makes note of the DYX index that measures the value of USD against other reserve currencies such as the euro, pound, and yen etc. The USD traded at 100.80 on 28th December citing the lowest in 5 months and gained momentum with a current standing of 103.75.
Fed’s Strategy Against Inflation
The index movement indicates that investors still believe in USD strength despite of ensuring fiscal problems. The report claims that economists and analysts are now betting on the Fed’s strategy for lowering inflation rates without sparking an economic contraction. During the last year, US inflation rates reduced by 2.43% in Jan, 2024 in comparison to 3.09% decline in December, 2023.
Meanwhile, economic projections from the Conference Board suggest a 1.7% growth for the US GDP during the first quarter and 2.4% growth for the Q2. The FedWatch Tool of the CME group has also projected the likelihood of interest rate cuts in March to decrease from 81% to 47%.