Bloomberg analyst bullish on Bitcoin
Few names in the business analytics world carry as much weight as Bloomberg. The financial data provider is considered the gold standard for assessing the health of financial markets and their future outlook. With most market participants at least taking Bloomberg’s analysis into account, Bitcoin bulls will be highly pleased about what the company’s senior commodity strategist Mike McGlone had to say about the current Bitcoin price action.
McGlone, who previously had been calling for a long-overdue correction in digital asset and equity prices, pointed out that Bitcoin “shows divergent strength” in the current difficult conditions. He also tweeted that Bitcoin is “digital gold,” and that Bitcoin faces deflationary forces after its 2021 “excesses.” McGlone noted that Bitcoin’s yearly losses are half of that of the Nasdaq 100, which could mean that “Bitcoin may be maturing toward global digital collateral.”
In another tweet, McGlone addressed the downside risk for Bitcoin. In his opinion, Bitcoin will not get much below $30,000 ($41,000 AUD), as it is holding “good resistance” around $40,000 ($55,000 AUD). McGlone sees the current market as a “very good buying opportunity for Bitcoin for longer-term traders” and even called it a “defining moment” in the asset’s history, that is going to be looked back upon.
Is Bitcoin really fulfilling its “digital gold” promise?
While Bitcoin has gained more popularity as a means of payment in the recent months, its core utility is still the promise to be the digital equivalent of gold.
As such, the recent weeks and coming months (and possibly years) could become the ultimate litmus test for Bitcoin’s utility as a collateral and global reserve asset. At the start of the invasion of Ukraine by Russian troops, the price of Bitcoin dipped, only to quickly recover alongside equity markets on the first day of the invasion. But while the Nasdaq 100 has had a torrid time in the last 30 days, Bitcoin has been holding ground and trading in a corridor.
Although it would be too early to call for a decoupling of digital asset (and specifically Bitcoin) prices from the equity markets, the divergence has been hard to overlook. Part of that can be attributed to worries (or hopes) that sanctions on Russia could be circumvented with cryptocurrencies and that the “financial nuke” launched by Western nations will lead to increased interest in cryptocurrencies. With the Russian government having a good chunk of its foreign reserves frozen by Western governments, it is not hard to see the appeal of a cryptocurrency that cannot be easily frozen or cancelled.
However, the proof will be in the pudding, and the worst is yet ahead for Bitcoin. Fast-rising commodity prices will put a proverbial gun to the Fed’s head, and interest rates will have to come up to avoid (official) double-digit inflation. It will be interesting to see how Bitcoin adapts to such stormy weathers.
As for now: global collateral on probation.
