Bloomberg Intelligence’s Mike McGlone joins the Live show to discuss the outlook for bitcoin, ethereum, and other cryptos, plus commodities like oil amid the Russia-Ukraine war.
Video Transcript
[MUSIC PLAYING]
AKIKO FUJITA: Well, Bitcoin is back in the green. After a rocky start to the year, the crypto market passed the $2 trillion mark today, boosted by big gains in Bitcoin after it surged past $48,000, erasing its losses for 2022. Joining us more with more on Bitcoin’s latest rally is Bloomberg Intelligence Commodity Strategist Mike McGlone. Mike, it’s good to talk to you today. What do you attribute the latest rally to?
MIKE MCGLONE: Hello, Akiko. I hate to use– saying more buyers. But the significance of Bitcoin that really struck me the last few weeks is it is the most significant, fluent, widely traded 24-7 asset ever in the planet. And when we saw nickel breakdown and couldn’t trade for a couple weeks, people look over to Bitcoin and say, man, this thing, it just doesn’t stop trading.
So I think what’s happening is in the macro is big– macro big picture is Bitcoin’s supply is declining by [INAUDIBLE] and its demand and adoption are rising. And you’re really seeing from the war its value coming out as a store of value exchange mechanism. In some places, it’s becoming global collateral.
So to me, that’s the macro big picture. And that was pulled down initially with that lower tide from the stock market. And it’s still going to be a pressure factor.
But I’ll end with this. The significance is Bitcoin is up on the air, what, 5% or so? And the NASDAQ is still down about 7%. So it’s showing divergent strength, which I expect to continue.
BRIAN CHEUNG: Hey, Mike, it’s Brian Cheung here. I want to ask you about Bitcoin, though, compared to other cryptocurrencies classes, because some have pointed out that Ethereum has also had an interesting amount of price movement over the course of 2022 as well. Is there any sort of change in the institutional investors? Are the same buyers that are buying Bitcoin also getting into Ethereum? Or is the divergence in performance suggesting that there’s actually a little bit of a nuance to who’s getting into this?
MIKE MCGLONE: Well, I love the way you describe it. It has been interesting. And I think a key way to look at Bitcoin versus Ethereum and then 18,000 other cryptos is Ethereum has a major solid use case. It’s building the Internet of Things, NFTs. It’s the foundation for crypto dollars, which are the most widely traded cryptos.
But it’s ebbing tide a little bit. Remember, it was up 5x a little bit. You can’t get 5x returns without some back and fill. So it’s got more to give as the Fed tightens and focuses on inflation.
But I think it’s going to come out ahead. The bottom line is we’re seeing a dichotomy between Bitcoin becoming digital version of gold and the world going that way, and a lot of other cryptocurrencies, like Doge and Shiba Inu, where it’s just speculative excessive. And they’re probably going to go away.
But Ethereum’s in a really good space. It’s just consolidating some of the gains from last year. And I’ll leave you with this. The key thing I always look at Ethereum is I keep it simple, is NFTs are all– most are denominated in Ethereum.
And then I look at crypto dollars. People call them stablecoins. Virtually all of them have been made happened by Ethereum. And they’re all denominated– they have Ethereum– work on Ethereum tokens. It shows the value of Ethereum.
AKIKO FUJITA: Mike, you know, one of the things we’ve been trying to figure out is as we see the market response to what’s been playing out between Russia and Ukraine, what that has meant for Bitcoin, number one, from an adoption standpoint, but also from a price standpoint. An interesting thing here you point out, Bitcoin and bonds versus oil specifically. Who has the advantage in that?
MIKE MCGLONE: Well, definitely Bitcoin. So let’s look at oil. It’s becoming– it’s being made redundant. And this war just proved that.
Russia is fighting a 21st-century war in the– and using 20th-century tactics. The 21st-century wars are economics. And the US is crushing it by not trying.
So look what the US has done. There’s the adopted technology. And by doing that, we’ve become the world’s largest net exporter of Liquefied Natural Gas, LNG, a massive net producer and excessive producer of agriculture, energy, liquid fuels. And include Canada in that. We have a surplus of liquid fuel production, about 20%.
And what does Russia do? It has an old-school method of producing fossil fuels. And it’s going to accelerate that process of moving away.
This was the case before the war. Now, we have got a great incentive to say, thank you, we don’t need that anymore. We’re moving on. Yes, it’s the pain in the short term.
And then you look at Bitcoin. And there, it’s part of that rapidly advancing technology that China’s pushed back on and the US is embracing. So to me, what I think we’re seeing here is a major paradigm shift. We’re early in days of the US crushing it, the dollar.
Why is the world going to the dollar and cryptos? Because it’s the best place to go. OK, we’re having this little, you know, issue with sanctions and everything, but it’s because we can.
So I think what’s happening is we’re seeing an economic war, where the US is going to crush it. And Russia and China are falling behind. And the number one thing to remember is you’ve got to adopt that advanced in technology.
And one thing I’ll leave you with is why does China have problems with stealing intellectual property? Because it doesn’t create like the US system does organically. And you’re seeing that play out in commodities. The commodities are basic. But it’s that production in the US that’s just blasting off.
BRIAN CHEUNG: And, Mike, I want to ask kind of finally just about oil. We’ve seen some pretty remarkable price movements over the last few trading sessions, the most notable today being the decline across WTI and regular crude oil. Is that tied directly to the positive developments we’ve gotten on the negotiations between Russia and Ukraine?
MIKE MCGLONE: Well, let’s look at it– yes– I guess, yes. You know, Brian, I just– look, I was in the trading pits in 1990 when Saddam Hussein invaded Kuwait. And crude oil went from 20 to 40, back down to 20, and it took 14 years to go above 40.
I see parallels. The big difference is now is the US is a massive excessive producer. It’s that elasticity of supply that’s the problem. Now, Russia was the spark to get prices way too high. Crude oil above $100 is almost three times the average US cost of production.
What’s that going to mean? It’s coming right back. It takes time. It’s a lag.
Was does it mean for demand? It pushes lower. And that’s the key thing I’ll leave you with, with the problem with commodities. It’s the elasticity of supply and demand will always prove that the higher price cure will kick in.
I think that’s happening. Russia’s part of that. And then that’s the opposite in Bitcoin. It doesn’t have elasticity of supply. It’s very unique in that space.
BRIAN CHEUNG: All right, Mike McGlone, Bloomberg Intelligence Commodity Strategist. Thanks so much for jumping on the show this morning. Appreciate it.
