The crypto market could be facing its “first real recession,” and milestones similar to the invention of Bitcoin (BTC) cannot be ruled out, a well-known Bloomberg strategist has predicted.
Writing on Twitter this weekend, Bloomberg’s Senior Market Strategist Mike McGlone reminded his followers that the last major economic contraction in the US, the Global Financial Crisis of 2007-2008, led directly to the creation of Bitcoin.
If we now have another “real recession,” a comparable outcome or technological breakthrough could be seen, he added.
Bitcoin’s white paper was released in October of 2008, less than one year into the crisis and just a month after the collapse of major US investment bank Lehman Brothers.
How much will crypto prices fall?
According to McGlone, who has become popular for his generally bullish stance on Bitcoin, the key question as we enter a recession is how much prices will fall before the longer-term uptrend for crypto can resume.
The note screenshotted in McGlone’s tweet further pointed out that the Nasdaq 100 index, a tech-heavy stock index that bitcoin tends to correlate with, is now trading right around its 200-week moving average. Such a price level remains “relatively lofty based on the history of US recessions,” the note said.
It added that Nasdaq 100 back in 2002 bottomed at a level almost 70% below its 200-week moving average, and in 2009 about 40% below it.
“We don’t expect the crypto market to be spared if the risk-asset tide continues to recede,” the note said, before finally offering an optimistic long-term prediction.
“In the unlikely scenario of a soft landing, the Bloomberg Galaxy Crypto Index appears poised to resume beating most equity indexes.”
High likelihood of a recession
The tweet from McGlone followed the release of Bloomberg Intelligence’s Crypto Outlook for February three days earlier. In that report, McGlone also warned about the potential for a recession and its impact on crypto prices.
“With the US yield curve showing the highest probability of recession in our database since 1992, it seems unlikely the indexes will avoid resuming the 2022 downward trajectory,” McGlone warned in the report.