Bloomberg’s chief commodity strategist, Mike McGlone, has warned that the parabolic rise of the largest cryptocurrency, Bitcoin (BTC), over the past decade is eerily similar to the inflation of the stock market bubble in 1929.
The Biggest Obstacle to Bitcoin’s Rise: The Fed
McGlone stated that the high interest rate environment reminded him of the major stock market crash in the 1930s. The analyst shared a graph showing the peak of the U.S. discount rate, which represents the interest rate applied to loans taken by banks from the Federal Reserve, just before the Dow Jones Industrial Average (DJIA) broke its 100-week moving average.
The graph also reveals how the Federal Reserve’s interest rate rapidly increased in the past year, causing Bitcoin to enter a downtrend from its 100-week moving average. McGlone accompanied the two comparison charts he shared with the following statement:
Bitcoin, one of history’s best-performing assets and a leading indicator, is currently resembling the stock market bubble that burst in 1930. Statistician and entrepreneur Roger Babson began issuing warnings about the rising stock market in 1929, similar to economist Irving Fisher. The Fed is bringing us towards a situation similar to Babson’s.
Bitcoin Could Be on the Verge of a Major Collapse
McGlone also mentioned that Bitcoin’s emergence reminds him of the technological advancements that occurred approximately 100 years ago when electricity, cars, air travel, and telephones became widespread. The experienced analyst at Bloomberg noted that the parabolic rise of the largest cryptocurrency and the revolutionary technologies in the 1920s coincided with periods of low interest rates by the Federal Reserve, leading to significant price increases. He stated:
What do you call this, a rising trend? It’s clearly a downtrend. The emergence of revolutionary technologies, parabolic price movements, excessive liquidity, and speculation highlight Bitcoin’s similarities to the stock market at the 1929 peak. The biggest difference is that the New York Federal Reserve began lowering interest rates in the fourth quarter of 1929 amidst the stock price decline.
