Bitcoin’s (BTC) value experienced a significant surge in the last 24 hours following reports of Grayscale’s major legal triumph against the US Securities and Exchange Commission (SEC) regarding a spot Bitcoin exchange-traded fund (ETF). This victory injected renewed optimism into the cryptocurrency market.
Nonetheless, caution remains imperative as underlying challenges persist, potentially curbing the sustained upward trajectory of BTC’s price amidst ongoing uncertainties in the crypto sphere and broader risk asset landscape.
Weighing in on these challenges on August 28, commodity guru Mike McGlone said Bitcoin is currently lacking a top catalyst that historically provided it with “easy-money days” and outlined a potential “lose-lose” scenario for the maiden cryptocurrency.
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Bitcoin’s surge threatened by low odds of rate cuts
Notably, in his analysis, McGlone focused on Bitcoin’s performance against Nasdaq 100 – a benchmark stock market index tracking the consisting of the largest 100 non-financial equities listed on the namesake exchange.
The expert highlighted that BTC first reached the current levels against the Nasdaq 100 in 2017; however, this time, the crypto asset is lacking a key catalyst to fuel its outperformance – the liquidity from the US Federal Reserve (Fed).
With one-year federal funds futures (FF13) sitting around 5%, there is “little chance the central bank will be cutting rates akin to the past easy-money days that Bitcoin grew up on,” McGlone explained.
FF13 represents a one-year federal funds futures contract that analysts and investors use to speculate on future changes in the Fed’s target for the federal funds rate – the rate banks use for overnight lending.
Notably, the FF13 contract predicts the rate’s level one year ahead, indicating market expectations for short-term interest rate shifts.
The ‘lose-lose’ scenario
Digging deeper into the analysis, the senior commodity strategist emphasized a potentially more pessimistic scenario for Bitcoin. This stems from the observation that the Federal Reserve is improbable to inject additional liquidity in the near future, given the presence of robust inflationary pressures.
“Here’s a potential lose-lose. It’s unlikely the Fed will be adding liquidity any time soon due to sticky inflation metrics.”
– McGlone said.
However, a major catalyst that could trigger a change is if “the resilient stock market,” – which has been helping keep interest rates elevated this year – starts trending downwards instead.
If stocks decline, most risk assets, including Bitcoin, suffer, said McGlone. The Bitcoin-to-Nasdaq ratio is on a downward trajectory “for a good reason – the Fed,” he added.
For now, there is little suggesting that something may change this path, the analyst concluded.
