Bloomberg Intelligence analyst Mike McGlone believes Bitcoin spot ETF approval is “inevitable” – but one bearish influence still remains: the Federal Reserve.
Given the ongoing hawkishness of most central banks worldwide, the analyst believes further downside pressure for both Bitcoin and stocks could lie ahead.
The Fed’s Looming Influence
As tweeted by McGlone, while the “inevitable approval” of the first Bitcoin spot ETF in the United States is “moving closer,” the Federal Reserve remains the “elephant in the room” for all risk assets – including Bitcoin.
“The Fed is still tightening despite the tilt toward economic contraction,” McGlone noted. “Breaking downward with volatility bottoming after extreme lows can often signal the start of a next price move.”
Last week, Fed chairman Jerome Powell reiterated the Fed’s commitment to curbing inflation back down to 2%, flying in the face of certain economists suggesting 3% may be a wiser target. Powell noted that, so far, the economy isn’t reacting the way the Fed wants.
After his comments, the market began pricing in a small likelihood of an additional rate hike this year, with rate cuts not expected until June 2024.
That’s bad news for the crypto market, which rose and fell alongside the Fed’s easing and tightening cycles in 2021 and 2022, respectively.
Bitcoin is still recovering from a breakdown to $25,000 earlier this month, which followed an extended period of all-time low spending and volatility for the asset.
The asset somewhat recovered this week, after Grayscale secured a legal victory of the Securities and Exchange Commission (SEC), in which the court determined that the SEC’s justification for denying Grayscale’s spot ETF application was “unreasonable.”
Bitcoin: 30k is the New 12k
McGlone called $30,000 a “key pivot level” for Bitcoin, which could indicate a “reversal upward” if Bitcoin reaches that level. At writing time, Bitcoin trades for $27,200.
The analyst compared this level with the $12,000 level in the second half of 2020. After rising above it in October of that year, Bitcoin embarked on a major rally to $64,000 in April 2021.
“A key factor that’s different this time is unfavorable liquidity,” he clarified. “Most central banks are still tightening and elevating rollover risks in the stock market.”