The Fed’s recent 25-based points interest rate cuts had a major impact on the global market, raising concerns, particularly regarding the cryptocurrency market.
Mike McGrone, senior Bloomberg Intelligence Macros Trategist, claimed that the market lives in a “fantasy world” and that investors are at risk of overweight.
McGlone noted that the Fed’s interest rate cuts are not always a positive signal for stocks, citing the S&P 500’s decline of over 50% after interest rate cuts in 2001 and 2007.
A strategist who classifies cryptocurrencies as “dangerous assets” said that gold markets continue to be on an upward trend, but cryptocurrencies are more vulnerable in this environment. McGlone claimed that the current market valuation is unsustainable, recalling previous forecasts that Bitcoin could fall to $10,000 by the end of 2025.
According to McGlone, the expensive nature of the market also puts pressure on the Fed’s policies. The start of the Fed’s interest rate cut is generally considered a positive indicator of the gold market, but it could indicate a long-term revision of high-risk assets such as stocks and cryptocurrencies. McGlone said, “There’s a lot of speculation in the cryptocurrency market and I think ‘everything’ will go up.’ There was only one cryptocurrency in 2009, but this could be a sign of a major bubble in the market. ”
The strategist said the current inflation cycle usually involves a period of deflation, and the deflationary trends in countries such as Japan and China could be a sign of the US.
McGlone believes the market is “closing the end of the risk-on-asset rally” and hopes to normalize important markets over the next three months. He warned that this normalization process could have devastating effects, particularly on overvalued cryptocurrencies.
McGlone argued that the Fed’s interest rate decision was made under political pressure, which could create a “bubble” in the market. He notes that, given the recent high correlation between Bitcoin and other cryptocurrencies and the stock market, cryptocurrencies are highly volatile “dangerous” assets and can experience significant declines during periods of risk aversion.
*This is not investment advice.
