Crypto Markets Face Lose-Lose Scenario Amidst Hawkish Fed and Overstretched Stocks

Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence, has warned that the cryptocurrency market is facing a stark future due to poor returns and extreme volatility since 2017. According to McGlone, the reason behind this behavior could be linked to a hawkish turn by the Federal Reserve and an overstretched SPX index valuation.

The Bloomberg Galaxy Crypto Index (BGCI) has performed poorly compared to the wider financial market since 2017, while still managing to be 4 times as volatile. McGlone uses the BGCI as a proxy for the cryptocurrency market, which includes top-tracked USD-traded digital assets such as BTC (35%), ETH (35%), XRP (15.5769%), SOL (10.1678%), ADA (1.3908%), LINK (1.4713%), and XLM (1.3933%).

McGlone points out that the crypto fund enjoyed its glory days in 2021 following what he called the 'biggest money pump in history', as significant liquidity was injected into financial markets to deal with the economic effects of the COVID-19 pandemic. However, the Federal Reserve has since turned hawkish again to fight high inflation levels, and it is expected to hike interest rates at least one more time in 2026.