Bitcoin is trading just under $28,000 after a fresh rejection near the key technical level of $30,000. Stock futures were largely muted on Monday ahead of a week likely to be punctuated with movement related to reaction to core inflation data.
While analysts continue to offer major bullish price predictions for BTC, such as the one Invezz highlighted here, the current market outlook has some observers pointing to possible drawdowns in the risky asset market – and bitcoin could pace these losses.
Why Bitcoin declines could see risk assets grind lower
According to Mike McGlone, a senior macro strategist for Bloomberg Intelligence says the benchmark cryptocurrency could lead stocks and other risk assets lower. His perspective is that this will likely be the case if the market sees further catalysts for downside action.
The commodities strategist noted in a tweet on Monday:
“If the worst isn’t over for risk assets, Bitcoin may lead the way lower. During the global financial crisis, the Nasdaq 100 slid about 55% vs. its roughly 35% drawdown from late 2021 to December, which has since eased on expectations for a soft landing. If that’s all for the equity bear market, it’s likely to be similar for Bitcoin and cryptos. But Bitcoin is up about 70% in 2023 to May 2 vs. 20% for the stock index, and those may be bounces within broader bear markets.”
The Bloomberg analyst says that the US Federal Reserve is “still tightening in May.” That’s after the Fed raised interest rates by 25 basis points. Although the Fed Chair Jerome Powell hinted at a potential rate pause, McGlone believes the central bank could be “more inclined to stay the course.”
Bitcoin Could Pace Declines for Risk Assets – If the worst isn't over for risk assets, #Bitcoin may lead the way lower. pic.twitter.com/UlEVjCEKwr— Mike McGlone (@mikemcglone11) May 8, 2023
While consensus for a soft landing may now be priced in, the analyst suggests the Fed might have to maintain the trend as they look to help inflation – unless risk assets – which would in this case have lose-lose implications for Bitcoin and other risk assets. Meanwhile, the analyst also points to the rising correlation between Bitcoin and Nasdaq.
Currently, the assets have a 0.42 correlation, which is near its all-time high as the liquidity pump that drove markets higher during the pandemic dwindles. If McGlone’s prediction were to materialise, then BTC price could retreat to support zones likely to include a retest of $25k or lower. The $20k area remains the long-term psychological support.
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