- Bitcoin retraced to its $27K zone, with looming concerns about its fall to $10,000 by year-end.
- Bloomberg’s Mike McGlone points to negative Bitcoin liquidity and the repercussions of rising interest rates.
After a brief peak surpassing $28,400, Bitcoin (BTC) has found itself recoiling to its more familiar $27K trading territory. As the cryptocurrency’s trajectory becomes increasingly volatile, Bloomberg Intelligence’s Senior Macro Strategist, Mike McGlone, has voiced his apprehensions. According to McGlone, Bitcoin could be vulnerable to a steep decline, potentially hitting as low as $10,000 before we bid farewell to the year.
Dissecting the Liquidity Dilemma
The crux of the concern stems from Bitcoin‘s pronounced negative liquidity. In blockchain and cryptocurrency terms, liquidity often denotes the ease with which an asset, like Bitcoin, can be converted into cash without affecting its market price. Negative liquidity, in this case, indicates a predominance of sellers over buyers. This imbalance, as McGlone suggests, is a pressing challenge, capable of undercutting Bitcoin’s current market value.
Further deepening the liquidity issue is the context of global interest rates. McGlone emphasized that Bitcoin‘s ascent to mainstream prominence coincided with a phase of notably low interest rates. However, as these rates begin their upward climb globally, the cryptocurrency arena could potentially be left grappling with prolonged repercussions. Notably, these concerns prevail even amidst looming recession indicators.
An illustrative chart accompanying McGlone’s insights depicts the historical interplay of FED fund futures prior to liquidity shifts. Drawing from this pattern, the data hints at the need for Bitcoin’s price adjustment in alignment with these FED fund futures.
Despite these concerns, it’s worth noting that the US Federal Reserve’s direct involvement with Bitcoin may be limited. Yet, McGlone sheds light on Bitcoin‘s growing significance as a round-the-clock traded asset, hinting at its increasing relevance in the broader financial landscape.
The $10k Precipice: A Reality?
In 2023, Bitcoin has undeniably basked in considerable gains, marching in tandem with other risk-laden assets. But McGlone advises caution. He speculates that this surge could be a fleeting one, driven by a
“short-covering rally.”
Drawing attention to the pivotal $30,000 threshold, he underscores its importance as a formidable resistance for Bitcoin. With the scales tipped, the imminent risk of a descent to $10,000 emerges more pronounced than ever.
