In a recent interview with Mike Mone, senior commodity strategist at Bloomberg, the question of whether Bitcoin will experience a parabolic move in 2024 was discussed. While there is a lot of hype surrounding Bitcoin’s potential, Mone expressed some concerns about its performance in the coming year. This article will delve into the reasons behind Mone’s predictions and explore the assets that may come out ahead in 2024.
Mone began by highlighting the extreme speculative frenzy that accompanied the launch of Bitcoin ETFs in the US. He noted that the stock market is currently at all-time highs, and there are concerns about a potential recession. With global GDP forecasted to decline and the US heading in that direction, Mone believes that risk assets, including Bitcoin, may face a downturn.
The strategist pointed out that the Bitcoin to gold ratio is an essential indicator to watch. In recent years, this ratio has been leading the stock market on the way up but lagging behind on the way down. Mone questioned whether a highly speculative asset like Bitcoin could outperform the stock market, especially during a recession.
Mone emphasized that the key moment to watch is when the stock market goes down, and Bitcoin either stays stable or goes up. He acknowledged that Bitcoin has not yet faced this test, as it has been rising along with other risk assets. However, he expressed concerns about Bitcoin’s performance in a declining stock market, as it has historically shown a higher correlation with beta.
The strategist also discussed the role of interest rates in Bitcoin’s performance. While Bitcoin typically goes up when interest rates are low, Mone noted that Bitcoin’s correlation with interest rates has been less pronounced recently. He attributed this to the market’s anticipation of excessive easing and liquidity injection by the Federal Reserve. Mone believes that the market is currently overestimating the amount of easing that will occur, which could impact Bitcoin’s performance.
Mone addressed the view presented by Fidelity analysts, who argue that Bitcoin is more correlated with monetary supply than consumer price inflation. While he agreed with this view, he cautioned against measuring Bitcoin’s performance over the past 15 years, as most of it was driven by speculation. He emphasized that money supply is still tilting negative, and high interest rates pose a significant headwind for Bitcoin and gold.
Regarding the recent approval of the SP Bitcoin ETF, Mone described it as a “buy the rumor, sell the news” event. He noted that Bitcoin’s price has fallen in the days following the approval, and the market is now waiting to see how much further it will correct. Mone highlighted the importance of observing Bitcoin’s performance in relation to other risk assets, such as the Chinese CSI 3000 index, which recently hit a new multi-year low.
Mone also addressed the influx of institutional capital into Bitcoin. While he acknowledged that institutional flows could help drive up the price, he questioned whether institutions would prioritize an asset like Bitcoin, which offers no earnings, over traditional assets like equities. He argued that institutions have historically focused on compounded returns and may be hesitant to invest in an asset without earnings.
In conclusion, while there is a lot of optimism surrounding Bitcoin’s potential for a parabolic move in 2024, Mike Mone expressed some concerns about its performance. He highlighted the need to observe Bitcoin’s behavior in a declining stock market and its ability to outperform other risk assets. Mone also questioned whether institutions would prioritize an asset like Bitcoin, which lacks earnings, over traditional assets. As the year progresses, it will be interesting to see how Bitcoin and other assets perform and whether Mone’s predictions prove accurate.