Mike McGlone – Senior Commodity Strategist at Bloomberg Intelligence – sees the top two cryptocurrencies outperforming other assets when the economy returns to bull territory.
The analyst said that Bitcoin, in particular, could be in its early stages of trading more like a safe haven asset, such as treasuries or gold.
Signs of a Bottom
According to Bloomberg’s crypto outlook report released on Wednesday, the fact that commodities appear to have peaked may have implications that Bitcoin has reached its bottom.
“When the ebbing economic tide turns, we see the propensity resuming for Bitcoin, Ethereum, and the Bloomberg Galaxy Crypto Index to outperform most major assets,” reads the document.
Historically, cryptocurrencies like Bitcoin have shown a propensity to trade like high beta tech stocks. The primary digital asset was ranked one of the best-performing assets during the low-interest rate environment of 2021, but has since fallen roughly 70% from its all-time high as the Fed continues to tighten.
However, most of Bitcoin’s downside volatility was experienced in June, while its Q3 performance was remarkably stable compared to other commodities and assets. Bloomberg claimed that this provides the potential for Bitcoin to transition into a risk-off asset in the year’s final quarter.
Compared to a tech stock like Tesla, the analysts believe Bitcoin may have found its bottom when weighed against the automaker.
Though both represent rapidly advancing technologies, it the report states that Bitcoin may see a long-term performance advantage due to its uniquely limited supply. While Bitcoin’s supply inflation rate will fall to under 1% in 2025, Tesla has averaged 5% increases in shares outstanding every year for over a decade.
It also noted that October has historically been Bitcoin’s best month since 2014, averaging 20% gains since that time.
On Ethereum, analysts said that it’s currently trapped in a “cage” between $1000 and $2000 – but nonetheless outperformed the NASDAQ 100 in 3Q.
“The nascent technology and more volatile No. 2 crypto has a tendency to outperform the stock index on the way up, but the merge may mark an inflection point of Ethereum also beating the Nasdaq 100 when it declines,” they continued.
Bloomberg highlighted Ethereum’s utility as a platform for “crypto dollars” as a major use case that will drive its adoption and price higher in the future.