Mike McGlone from Bloomberg Intelligence says FTX's collapse could trigger a domino effect across markets. Bitcoin could fall to $10-12k, commodities and stocks will weaken, and the economy heads toward deflation as investors flee to gold and treasuries.
Wednesday the 9th (as stated in the interview).
$10,000–$12,000 area.
About $19,000–$20,000.
100% (as cited in the interview).
The FTX crisis has shocked the crypto industry and sent markets into turmoil. But what if this is just the surface? What if the FTX debacle is going to spark a larger crisis in crypto and perhaps even beyond?
Bitcoin has been one of leading indicators on the way up and it's a leading indicator way down, and it's just broken down. So expect most dominoes to foul.
To understand the broader impacts of these latest events, we sat down with Mike McGlone, senior commodity style strategist at Bloomberg Intelligence. Before we get started, as always, don't forget to like the video and subscribe to our channel. I'm Giovanni. Let's get started. The situation is evolving very rapidly. So what are your impressions and these scenarios that you are considering at the moment?
The bottom line for me is this is a major shock to the entire crypto system with domino effects to everything. That Sam Bankman Fried might come out as potentially somewhat of a fraud. He was the savior in the space. He was considered J.P. morgan of the space, who helped save the financial crisis in the early 1900s. And just the fact that FTX is going under and what it turns out. In the Bahamas and he, it was him on stage with Bill Clinton, Tony Blair, and it was quite significant. But that person who I still respect, but that is the shock to the system. So bitcoin breaking down to a new low in the year and below 20,000 has potential to be a catalyst for everything to break down. And that's what's happened. When it first hit the tape on Tuesday, crude oil was one of the first things that broken down and since dropped another 5%. As the time we're taping this on Wednesday the 9th, the stock market starting to break down. It's just the markets at that point in the year, everybody who's bought dips all year have basically lost money in all assets. The Fed's tightening more aggressively. Every central bank on the planet is tightening into recession and people have tight trigger fingers and stops. So to me, this is a trigger to hit the stops for everything.
Yeah, definitely. It was the last of a number of shocks that we witnessed this year. We weren't expecting. Sam Banker Fried it seemed to be like the white knight of the crypto industry, saving, trying to save a lot of those troubled firms and then at the end falling victim of these dynamics himself. Where do you see Bitcoin and Ethereum going from here in the next few weeks and months?
Let's say down right now down. Something's unusual, has got to save It I'm afraid bitcoin might head to the 10 to 12,000 area. I don't see it getting above 20,000 to show anything other than more lower. It's got to sustain above that 19 to 20,000 level. And I fully expect there'll be responsive selling when we get near there. This is a major shock and you got to respect that shock. The bigger picture is at some point I think it's going to break out, but that's going to evolve. Getting the central banks, the Fed off that pounding sledgehammer and parents like that's still early days. So what we have Here Giovanni is 1929ish. We have the world tilting towards recession clearly in Europe our recession model for my Bloomberg economics team our chief economist Anna Wong for US recession next year is 100%. My colleague in Hong Kong shows China's property crisis has to drop another 25%. This is the dominoes and the number one leading most fluid 247 training vehicle on the planet. Bitcoin has broken down from a consolidation period. I look at that as a technician, as a fundamental guy is just look for rallies to sell. I don't know what saves us in the big picture. This is the breakdown of all risk assets. So next year I think by the time we're speaking this time we'll be talking about an enduring deflationary recession, maybe a recovery in bitcoin, potentially Ethereum doing okay. Theorem still been very impressive. It's holding above a thousand. It's been outperforming bitcoin all year. It's gone through the proof of, of transition to proof of work at a great time. You know when we have this energy crisis and it's revolutionizing fintech and financial markets but that global digital collateral, Bitcoin is under pressure and will remain. You know, it's been one of the key leading indicators. So I fully Expect I said 20,000, good resistance, 10 to 12,000 and good support for an extended period.
You said that basically the loss of confidence from FTX downfall is a shock for crypto but the macroeconomic dominoes could be more significant. So when you talk about these macroeconomic dominoes, what do you mean exactly and are we talking about some risk of contagion? Because that's what a lot of people are talking about.
Yes, we. It's a catalyst for people to hit stops in positions in what have been bear markets, in the stock market, what looks like it's rolling over to the bear market in commodities and it's the great reverse. Bitcoin has been one of leading in caters on a way up and it's a leading indicator way down. And it's just broken down. The key fact is almost always in global economic cycles commodities rally and expansions and decline in contractions. We're heading towards a contraction and commodity. Bring on that demand and help pressure that supply. And they're nowhere near that even close. I've been early, I've been wrong. Early did not kind of look like an idiot. Early in the year went to 130 but now that pump is is helping accelerate the dump. Not profound. With what crude oils always does, you need pretty significant lower plateau in risk assets and a good leading indication for commodities that go lower. So lower stocks, lower commodities, potentially a bottom. And I think fully expect long bonds to start being one of the better performers that we head towards inflation.
You still stand by your prediction that we are going to transition from an inflationary to a deflationary environment next year, potentially with a recession. And you said multiple times that in such an environment Bitcoin together with gold and treasury bonds will come out ahead so they will perform well. That we are witnessing. How has this view of yours changed.
So from a lower plateau, unfortunately. So I fully expect Bitcoin is going to at some point return to its longer term and during upward trajectory and get towards $100,000. Something has to really change. Supply going down, demand adoption going up. Now right now we're hitting a blip. Now we've had a lot of blips like this in the past. We've suffered a thousand cuts and we're survived. But the key thing that really needs that for that trajectory to start, first of all it has to show a bit of a foundation bottom. That's probably going to take the federal funds rate expectations to stop going up in terms of yield and start going down. They're still around 5% for a year from now. That's pretty high. You know that starts trickling down. We start seeing the Fed easing central banks coming off this aggressiveness. Then I fully expect long bonds and gold will be some of the better performers. U.S. treasury long bonds will be some of the best. They've been beat up. This is one of the worst bear markets ever for bonds. But I think that's going to form that foundation for them to go back to that. And bitcoin's part of that. The key thing. Remember bitcoin's only been around for a little bit more than a decade. It's a nascent asset class. Last. Sam Bankman fried going down was a severe shock.
