- Mike McGlone, a 30-year market veteran, is a senior commodity strategist at Bloomberg Intelligence.
- McGlone shares the two events that turned him from a gold bug to a crypto bull.
- He also lays out the 7 catalysts for bitcoin and ethereum to reach $100,000 and $5,000 over time.
The two largest cryptocurrencies got a much-needed boost after billionaire Elon Musk revealed that he holds both in his personal portfolio.
The self-described “technoking” of Tesla, whose portfolio also includes Dogecoin and Tesla and SpaceX stock, revealed on a star-studded panel that his electric-vehicle company would “most likely” resume accepting bitcoin as payment once he confirms the renewable energy usage in bitcoin mining.
Bitcoin (BTC) and ethereum (ETH) both rebounded after the “B Word” conference, hovering above $32,000 and $2,000 respectively as of mid-afternoon Thursday.
The much-cheered crypto rally was not unexpected for Mike McGlone, a senior commodity strategist at Bloomberg Intelligence with over 25 years of futures and commodity trading experience at the Chicago Board of Trade, ETF Securities, S&P Indices, and elsewhere.
“I think it’s just a matter of time that it breaks out and resumes enduring upward trend,” McGlone said in an interview on Tuesday when bitcoin drifted below a key support level of $30,000.
In his view, there are legitimate reasons for bitcoin to trend lower in the short term. China’s crackdown on bitcoin mining and ESG concerns over the energy waste in mining have weighed on the cryptocurrency, but these are also long-term bullish signals as bitcoin mining becomes freer and more energy-efficient.
From physical gold to digital gold
McGlone hasn’t always been a crypto bull. In fact, he was quite skeptical until bitcoin broke above the price of gold for the first time in 2017, which was $1,237.73 per ounce when bitcoin hit $1,238.11.
A more recent event that added to his bullishness was when the New York Attorney General came down on the stablecoin Tether in 2019. The lawmakers found Tether’s claim that it was fully backed by US dollars at all times to be false and deceptive, which struck fear given Tether’s role as a key piece of plumbing in the crypto market.
“The market pushed back and fell down in short term and came right back. That’s when I got bullish on bitcoin around $5,000 and I’ve been bullish ever since,” he said. “When the market said it didn’t care, then I realized that this was more a case of the organic global demand pool and the revolutionary aspects of bitcoin.”
McGlone thinks bitcoin is heading towards $100,000 and “it’s just a question of time” before it gets there.
He interprets the short-term price pain as a typical occurrence over the potential long-term price gain and lays out the four catalysts going forward in a Wednesday research note.
1. China’s crackdown on bitcoin mining has caused a plunge in hash rate.
“This measure of computing power has a low correlation with Bitcoin’s price, but reflects a network that’s rapidly shifting away from China dominance,” he wrote. “China’s lack of free flow of capital and discourse, plus its apparent animosity toward Bitcoin, extols the digital currency’s revolutionary nature.”
2. Bitcoin and T-bond prices are in a “friendly trend.”
McGlone explains that crypto peaked at about the same time as bond yields after both bottomed simultaneously in 2020. “As is the case for gold, a resumption of the elongated bond-yield downtrend would underpin the digital store of value,” he said.
3. Bitcoin price is down but regulation and mainstream adoption are up.
“Increasing regulation is indicative of Bitcoin’s migration into the mainstream,” he said. “What’s different now — other than just pricing — is less supply and more demand, as evidenced by ETFs, notably in Canada.”
4. Bitcoin is “too cold” which could face reversion
“When prices get stretched against more enduring fundamental trends, it typically takes only a slight catalyst to trigger some reversion — the condition we observe in too-hot crude oil vs. too-cold Bitcoin,” McGlone wrote.
Ethereum — the infrastructure and the building block
Ethereum, the go-to platform for decentralized finance, is also facing three catalysts that could see the native token ether reach $5,000.
1. Ethereum has overtaken bitcoin in the number of active addresses on its network.
“Ethereum’s price is about even with addresses at the start of 2H, on an autoscale basis since 2018, and looks well-poised to resume its rise,” he wrote in a July 6 research note.
2. Ethereum is following Bitcoin’s 2017 trajectory
McGlone said this similar trajectory means that ether could “stay within the $2,000 to $4,000 range roughly until October and maintain a 2017 Bitcoin-like flight plan.”
3. Ethereum supply may be more limited than bitcoin
Ethereum has several upgrades coming up that could make its network more efficient and scalable. The shift to proof-of-stake mining and the improvement proposal (EIP-1559), which will burn tokens, are favorable for the price of ether to rise, McGlone wrote.
“Many of the upgrade benefits may be priced in for Ethereum, but our bias is toward sticking with the trend,” he wrote. “EIP-1559 may tilt incremental supply to negative.”