Bloomberg senior commodity strategist Mike McGlone discussed the current situation of Bitcoin and other cryptocurrencies in a recent assessment.
McGlone suggested that the large number of digital assets may be putting pressure on Bitcoin's performance.
McGlone Argued that the Increasing Number of Altcoins Negatively Affects the Bitcoin Price
McGlone used the metaphor of “up on the escalator of liquidity, down on the Fed tightening elevator” to describe the status of the nearly 10,000 crypto assets listed on CoinGecko. This statement also summarizes the decreasing close relationship between the federal funds futures (FF13) and the ratio of small market cap cryptocurrencies to Bitcoin over the past year.
The proliferation of these “copycat” digital assets, which McGlone claims number around 10,000, is the result of an unprecedented period of zero interest rates. However, according to the analyst, this trend is rapidly reversing.
According to McGlone, since 2018, Bitcoin has generally outperformed the MarketVector Digital Assets 100 Small Cap index, especially during periods when the Fed has tightened monetary policy. However, McGlone warns that the rapid wealth generation in the crypto ecosystem is reversing and may continue to have a negative impact on Bitcoin for some time.
*This is not investment advice.