Chief commodity expert of Bloomberg Michael McGlone has shared a Bitcoin chart, tweeting that a big reversal may soon take place for BTC, which he referred to as "it'll go up because it went up," as many say in the crypto community.
Speaking about a possible reversal of Bitcoin, he referred to the negative U.S. money supply and the continuous rise of T-bill rates. The latter remains the highest in the past two decades. These "may be headwinds," McGlone wrote in his X (Twitter) post.
He believes that the bounce that risk assets, including Bitcoin, until now, have seen this year has "buoyed Fed vigilance" and since "liquidity fuel" has been removed, Bitcoin may "revert toward enduring means."
This May Be the Big Reversal of It'll Go Up Because It Went Up - Negative US money supply and T-bill rates still rising at the highest in about two decades may be headwinds. This year's bounce in most risk-asset prices has buoyed #Fed vigilance and might do what's typical in… pic.twitter.com/OuQYH2p3yT— Mike McGlone (@mikemcglone11) August 22, 2023
After printing trillions of USD after the pandemic that broke out in 2020, the Federal Reserve has taken to quantitative tightening by making its balance shrink. In February this year, the M2 supply fell 2.2% compared to 2022. According to Reuters, the money supply is falling at its quickest pace since the 1930s, when the Great Depression hit America. Experts believe that despite the recent rate hike, the highest in 22 years, the Fed may soon start cutting the interest rate.
Bitcoin likened to stock market of 1929
In an earlier tweet, McGlone compared Bitcoin and the behavior of the stock market back in the 1930s. He stated that Bitcoin has a lot in common with the stock market as the latter was heading toward its peak in 1929 – there were also "parabolic price moves," "excessive liquidity and speculation" and "revolutionary technologies" emerging, with electricity, telephone, automobiles and the new ability to travel by air.
The only difference, McGlone says, is that back in 1929, the Fed began cutting rates. As of now, since March 2022, the Fed has been raising rates, employing quantitative tightening. According to part of the Bloomberg report shared by McGlone in a screenshot, Bitcoin's 100-week moving average has reversed downward. As a result, the report says: "It may be a question of how long risk assets have to go for liquidity to get turned back on."
What's Bullish About This? Downtrend, Fed Hiking -— Mike McGlone (@mikemcglone11) August 21, 2023
The advent of revolutionary technologies, parabolic price moves, excessive liquidity and speculation are what #Bitcoin has in common with the #stockmarket as it neared the 1929 peak. A big difference is that the #Fed Bank of New… pic.twitter.com/MILaU4YrrI
At the time of this writing, Bitcoin is changing hands at $26,085, per CoinMarketCap, after plunging by more than 8% at the end of last week. Since then, the leading crypto has been trading sideways at roughly the $26,000 level. The plunge came on the rumors that Elon Musk's SpaceX sold a large amount of Bitcoin. Some also believe that this is a typical BTC price plummet before an upcoming halving, which is to occur in May next year.