Bloomberg Intelligence strategist Mike McGlone has warned that the resilience of Bitcoin (BTC) could be the key factor preventing a U.S. stock market collapse similar to past deflationary downturns.
His analysis suggests that staying elevated may be the market’s last line of defense against a broader economic correction following the inflationary surge of recent years, McGlone said in an X post on October 19.
“Staying lofty might be a top prerequisite for the US stock market to avoid a typical deflationary downturn following inflation,” McGlone said.
McGlone pointed to the equity market’s current valuation of about 2.3 times nominal GDP, a level that implies the stock market is the economy.
Historically, such extended valuations tend to revert toward more sustainable levels, around 1.75 times GDP, which marked the post-2020 equilibrium.
The strategist added that persistent weakness in cryptocurrencies compared with precious metals, he argued, may be signaling that this reversion is already underway.
Indeed, his outlook comes as trade tensions between the U.S. and China have spooked investors, with Bitcoin taking a hit and facing an increased risk of correcting toward the $100,000 level.
Contrasting gold performance
He further highlighted the contrasting performance of gold and crude oil: record-setting strength in gold against declines in oil prices underscores mounting global economic stress.
Notably, the precious metal has been on a strong upward run, hitting a record high above $4,200, with market players warning that this momentum could signal potential economic stress.
That pattern mirrors previous recessionary paths, with investors favoring safe-haven assets while industrial commodities retreat.
According to McGlone, the only factor that could halt this trajectory in the fourth quarter is renewed market volatility.
At the same time, the S&P 500’s 90-day volatility recently fell to its lowest in about five years, and a rebound could act as a catalyst, either stabilizing markets through renewed risk pricing or accelerating the long-anticipated correction.
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