Bloomberg Intelligence Commodity Strategist Mike McGlone joins Yahoo Finance Live to discuss bitcoin’s recent price action and the outlook for the cryptocurrency market.
Video Transcript
BRIAN CHEUNG: Welcome back to Yahoo Finance Live. Time for our Crypto Corner presented by Intuit Turbotax Live. Bitcoin on the move as markets continue to digest the headlines out of Russia’s attack on Ukraine. You can see up to about 39,000 as of right now.
So joining us to break down the price action is Mike McGlone, Bloomberg Intelligence commodity strategist. Mike, it’s great to have you on the program this morning. There’s been a lot of action, and it’s a bit of a fool’s errand to attribute any individual movement, especially for Bitcoin, to any one news headline. But, look, we were as low as, what, 34,500 as of Thursday, yesterday. What do you think is behind the movement?
MIKE MCGLONE: Hello, Brian, and I’m glad you opened it up with let’s try not to make it a fool’s game by trying to figure out the nuances of each day. The big picture that’s happening to Bitcoin is it’s actually showing quite divergent strength versus stock market. Now all risk assets are going down this year, and Bitcoin or cryptos are among the riskiest assets. This Bitcoin is the least risky crypto, so it’s divergence strength versus NASDAQ is right now NASDAQ on the year is down about 14%, and Bitcoin is down about 14%.
But Bitcoin, typically, on a 260-day annual basis trades about four to five X that volatility risk of NASDAQ. So what I see happening is all risk assets going down and that divergence strength kicking in Bitcoin. I expect by the end of this year, we might see more reversion and risk assets lower, i.e. Because they have to because inflation, the Fed, and now we have a war. But I see Bitcoin coming out ahead, and we’re seeing a little bit of that lately.
– And, Mike, you put out a tweet earlier this week that got some attention about the fact that you think that Bitcoin is on the cusp of getting strong support. What is that support level you’re looking at, and how much more do you think it falls before we get there?
MIKE MCGLONE: Well, right now, it’s between 30,000 and 40,000. I don’t think it gets much below 30,000 because what I sense and I see is responsive buyers coming into space, and they’re not the day trader types. This is more the institutional types, I think, are thinking, OK, I’ve got to allocate to this space for the risk that it just continues to do what it has been, and I’m under allocated compared to maybe some other assets, like equities, or I’m over allocated. So I think it holds 30,000 this year, despite the fact I think the S&P 500 could correct 20%.
It means maybe another 10%. But the key resistance right now is 40,000, so it’s locked in a range. But I like to look at it– let’s look at it a couple of years from now. We’re going to look at this period as kind of, I think, the transition, kind of the noise and its process towards becoming global digital collateral. Now that’s a fact of what it’s been doing.
I don’t think it’s going to change, and I fully expect it’s on its way to get to 100,000. It’s just a question of time, and right now, all risk assets are under pressure. The Fed is going to be tightening. Who knows what’s going to happen with the war in Europe? But there’s a lot of reasons for caution, but Bitcoin is on its way to becoming a global digital reserve asset.
BRIAN CHEUNG: 100,000, I mean, that’s a pretty big call there. I think one thing that’s been kind of in the minds of investors is whether or not it’s becoming correlated as a risk asset to the tune of the big tech companies. I mean, interesting correlation between the NASDAQ 100 and Bitcoin over the past few days of the Russia-Ukraine headlines. I mean, do you see that as a fair comparison, and is that kind of broadly in line with your expectations for where Bitcoin can go from here?
MIKE MCGLONE: No, absolutely. I’m glad you went there, Brian, because when we have the stock market going down a lot, all correlations go to one. Now that’s what’s been happening a little bit this year. Cryptos are very risky. They’re going down. Now, remember, there are 17,000 cryptos. Massive speculative excesses. We’re purging some of that. Remember what happened 2021. Massive fiscal monetary stimulus. All assets go up, so we’re reverting some of that.
But what I sense is Bitcoin coming out ahead. Remember, it’s in the stage right now– it’s in a price discovery stage. It’s a nascent asset/technology, and it’s just gaining adoption. It’s very a small portion of most portfolios, and it’s just picking up. I mean, you can get ETFs easily in Canada and Europe, but not in the US yet. They’re not proper ETFs. So, to me, that’s the stage we’re in. It’s in a transition, and what’s happened so far, China banning it, has really beholden the US to embrace this technology.
And now what’s happening in Russia, I think, is all more. The US needs to embrace. And the key thing to remember about cryptos is the most widely traded cryptos are crypto dollars. Some people call them stablecoins, but crypto dollars are– they all trade on the Ethereum token, and the market organically is gone for the dollar, which means US dollar dominance in this world that’s a bit dicey at the moment, which I think the US regulators are really going to say, OK, thank you– let’s just embrace this and not mess it up.
– Mike, Russia is one of those countries, of course, where we have seen big growth in crypto adoption. Russians accounting for, I think, roughly 12% of global crypto assets. I wonder what you make of this idea that Russia may be able to evade some of these US sanctions with the tools they have in place in crypto. I mean, is that overstated, or you think that works to their advantage?
– Well, that’s– let’s just think. Let’s point out what’s really happening in a lot of the world. You can get access to a dollar now via your phone. I mean, look a lot of the countries in the world with melting currencies.
We can name a few, but you know where they are. Russia is one of them that, lately, where the average citizen doesn’t have to go through a bank anymore. They can go through that decentralized network and get access to the buck. And there’s no better currency on the planet than the dollar.
So then there’s things like Bitcoin. Now Bitcoin, you might want to store some of your value there and get that appreciation. But the thing about Bitcoin, as we learned recently, is you can track every transaction. It’s not good for criminals. In fact, our authorities love it because they can track those transactions.
So it’s the key thing that we’re starting to learn. This nascent technology has a lot of advantages, and the key thing to remember is, yes, Russia is involved. A lot of Russian citizens who are protesting against this war probably aren’t saying, OK, thanks, I need to diversify some of my Rubles into dollars via my phone, which they couldn’t in the past, and then you look at the rest of the world thinking, OK, where’s the stability at place? Where can I get access to the dollar?
I can do it now via stablecoins, and they are all are based on Ethereum tokens. So that’s part of that trickle up, trickle down that leaves digital assets. To me, this is part of that defining moment now where the world says, I can get away from my oppressive government and get access to outside it, and I can get access to the dollar via tokens.
So, to me, that’s what’s happening. And it’s a question of does it continue? I think it’s going to accelerate.
– Yeah, it’s an interesting thesis. We’ll be watching closely to see if, in fact, it does move in that direction. Michael McGlone, Bloomberg Intelligence commodity strategist, good to talk to you today.
