Cryptocurrencies showed weakness in the second quarter of 2023 as the stock market continued its gains and US regulatory pressures intensified.
McGlone Argues Cryptocurrencies Cannot Revive As Nasdaq Stays High
According to Bloomberg senior strategist Mike McGlone, the crypto market may face more challenges in the second half of the year as long as stock prices remain high.
McGlone noted that the Bloomberg Galaxy Crypto Index (BGCI), which tracks the performance of the largest and most liquid cryptocurrencies, fell 2% in the second quarter, while the Nasdaq 100 Stock Index, which represents the technology industry, gained 15%.
This indicates a divergence between the two markets, with cryptos losing momentum and attraction.
One of the reasons for this weakness is the increased scrutiny and regulation of the crypto industry by the US authorities, which has taken action against some of the leading crypto representatives such as Bitcoin exchange Binance, Coinbase and Tether.
McGlone also pointed out that the US macroeconomic outlook is not favorable for risk assets, as Bloomberg Economics expects a recession and unemployment to rise to 4.3% in the second half of 2023.
McGlone concluded that whether stock prices will remain high at the heart of the crypto market revival, as they provide a fertile ground for alternative assets.
McGlone also showed a chart comparing BGCI with Nasdaq 100 and federal funds futures over a year, showing monetary policy tightening. The chart shows that BGCI is still trading below its 2017 high, despite the Nasdaq 100 surging past its previous highs.
*Not investment advice