It is possible that global commodities may take a tumble, but the change might be good news for Bitcoin and its crypto market. As the U.S. Federal Reserve (FED), is aiming to prevent inflation from getting worse, the nascent asset category has been under pressure.
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Bitcoin (BTC) is trading at $31,300 as of the writing. The last 24 hours have seen a 4% profit. Over the last week, benchmark crypto has made a record 6% profit. BTC’s price has finally broken its consecutive weeks of trading in the red.
In the short-term, this trend might continue. The trend could extend in the short term according to Mike McGlone, Senior Commodity Strategist Bloomberg Intelligence.
The reportThe following is what the Bloomberg Commodity Spot Index reveals and what factors suggest an increase in the selling pressure within this sector.
Commodities may be swinging toward the downside in 2H, just like they did in 2008, We see parallels in 2022 and rising risk for a similar, roughly 50% plunge (…). The emergence of copper and lumber that is falling may signal that higher prices will soon prevail.
McGlone claimed that there has been a Russia-Ukraine War and a drop in global liquidity. According to McGlone, the COVID-19 Pandemic has led to an expansion in U.S. money supply.
The main reason for the rise in commodities is because of the shifting narrative away from the disease. Although this may be a negative for the industry in the near term, it could prove to be good news and a boon for Bitcoin. McGlone pointed out:
The Federal Reserve may be strengthened against inflation if commodities continue to rise. The 2H leader in gold may be Gold.
Bitcoin: More blood ahead? What the FED Seeks in Risk Assets
NewsBTC reports that a fall in commodity prices may have an opposite effect on Bitcoin, and other risk-on assets. It could be less aggressive if the FED considers its tightening policies effective.
A fresh rally in commodities is a “threat” to economic growth, which would tell the FED that it needs to be more hawkish, which would translate into more pain for Bitcoin. McGlone noted the following in this scenario as BTC’s price, correlated with traditional stocks, such as the S&P 500 and Nasdaq 100 are currently trading above critical support:
The S&P 500 sustaining below 4,000 represents an ebbing tide for all risk assets, notably industrial metals, and support for gold. If equity prices keep sinking, the Federal Reserve will get some help arresting inflation (…).
McGlone indicated that the market expects more interest rates hikes. That would translate into greater pain for Bitcoin and stock markets. According to experts, interest rate hikes are expected to rise at 2.5% at the moment and hover around 2%.
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The U.S. financial institution seem to have been able to stop inflation after a significant decline in traditional equity prices. McGlone said that the early stages of pain in Bitcoin and stocks as well as risk-on assets may be where it is most effective.
but the underlying potential for what we see as the great reversion of risk assets in 2022 appears in early days (…) despite a 20% retreat in the S&P 500 indicates that prices haven’t sufficiently declined.