Bitcoin Prices Could See a Major Fall, Says Bloomberg Strategist

Bitcoin price is currently facing sluggish movement throughout the week. For the past four days, BTC has been declining and reached the crucial support level of $27,650. Bloomberg senior macro strategist "Mike McGlone" has voiced concern about Bitcoin's volatility's possible influence on the larger market.

Amid the memecoin frenzy, the Bitcoin price is set at a lower risk due to its utility while other assets like recently launched cryptos and hyped memecoins could fall severely if Bitcoin declines. McGlone's concern is with a broader market downturn due to BTC's historical impact on other coins. 

This turn of events illustrates BTC's rising influence in the industry as a whole. If the current slowdown in risky assets continues, McGlone believes Bitcoin will be the first volatile asset to fall.

Bitcoin Could Pace Declines for Risk Assets

Mike McGlone has cautioned that if the worst is yet to come for risk assets, Bitcoin may be the first to fall. McGlone drew analogies to the global financial crisis, when the Nasdaq 100 fell by 55%, as opposed to the present 35% decrease. 

Despite Bitcoin's 70% spike from 2023 to May 2, compared to the stock index's 20% increase, McGlone believes these are ephemeral rebounds amid larger negative markets. He cautioned that the Federal Reserve's choice to keep tightening and remain on pace unless risk assets collapse to assist alleviate inflation might end in a lose-lose situation.

According to Bloomberg's graph, the 100-week Bitcoin to Nasdaq correlation is about 0.42, which is around the highest level ever. The pandemic's liquidity pump is rapidly dumping, signalling that the market is in for a rocky ride.

Bitcoin is not only suffering from the recent decline but also from network congestion. After the debut of Bitcoin ordinals NFT, the block size of Bitcoin has extended far beyond its limit of 1MB. This is mainly due to the recent transaction spike in Bitcoin ordinals which are not only inscribed with long strings but also Images, GIFs, videos etc. 

According to the data by Blockchain.com, the average Bitcoin block size attained ATH in February during the launch of Ordinals NFTs which took the Mean block size limit to almost 2.25 MB which is 125% more than BTC's block size limit.

 Due to the small block size limit, low transaction speed and high transaction volumes, the Bitcoin network is experiencing network congestion due to which new transactions are taking longer time to get approved. Hence, creating and minting new blocks becomes sluggish.

Source: Blockchain.com

Bitcoin Onchain Analysis

Bitcoin is looking great again for Buyers again. As per the on-chain metrics, Bitcoin is one of the best regions for long-term holders to grab upon the crypto as per the Bitcoin on-chain analysis. 

Bitcoin (BTC) is currently trading at $27,639.77 with a 24-hour trading volume of $11,585,255,194. This reflects a -1.13% price drop on the previous day and a -1.74% price drop over the previous week. With 19 million BTC in circulation, the market capitalization of Bitcoin is $535,332,593,314.

Looking at the Bitcoin Rainbow chart, the price is trading below the red zone and right now moving inside the Blue zone (Also called the Fire Sale zone). This zone is evidence of generating huge profits later when the Bitcoin price goes above the light-orange strip (FOMO intensifies zone). 

Historically, this narrow zone has been tried and tested and mainly the prices have gone exponentially high from this region. So, there's a maximum possibility of Bitcoin prices surging in the long term.

Source: Lookintobitcoin

Another long-term on-chain metric is 2-Year MA Multiplier which also helps to predict long-term Bitcoin prices. Historically, buying Bitcoin when the price falls below the two-year moving average (green line) has resulted in exorbitant profits. Selling Bitcoin when the price rises over the 2yr MA x 5 (red line) has traditionally been an efficient way to earn.

Currently, Bitcoin is residing below the green line, which indicates that Bitcoin is below the 2-year MA and it may surges to catch up with the gap created.

Source: Lookintobitcoin

Conclusion

At the press time, Bitcoin is looking a bit depressing as market sentiment is mostly capturing the memecoin mania due to which investors' attention is getting diverted to make short-term profits. Meanwhile, on-chain indicators suggest greater long-term benefits with near-future decline before the prices go beyond the horizon.

DIsclaimer: The above information is the sole opinion of the Author and shouldn't be taken as investment advice. DYOR before investing in digital assets.