Why This Bloomberg Strategist Has High Hopes for Bitcoin and Ethereum

Does spring always follow winter? This Bloomberg strategist believes that is the case for the current cryptocurrency market.

This bear market that cryptocurrency is experiencing is so dramatic that it is being called the "crypto winter phase." Many blockchain tech companies are having to lay off employees and scale back production in light of the drop in value seen across the board this year.

The great reversion

Mike McGlone, a Senior Commodity Strategist at Bloomberg Intelligence, believes that despite all of these drops, there is a tailwind on the way for these digital commodities. He believes that in light of the dramatic downswing in coin prices, the market is being primed for a "great reversion," where the prices swing back to the upside. And, according to McGlone, Bitcoin and Ethereum will be at the top. This theory is in light of the high performance of these two coins in the past.

Bitcoin and Ethereum are far from done

For instance, he cites the fact that most NFTs are powered by Ethereum, indicating that much of the technology is run on Ethereum, giving it inherent value. As the world enters the digital space more and more, these high-performing coins will continue to be essential players. After all, what goes up must come down and vice versa. We are watching the crypto market going down, and so it is safe to assume it will go back up, as the market is always correcting itself with ups and downs.

But cryptocurrency investors want to view the commodity as a "safe-haven" or a hedge against inflation. When asked why it hasn't been performing as such lately, McGlone said, "It's a transition period. It has to be one of the most significant risk-on assets in the history of mankind. It's got to purge some of that risk-on. What I see is a transition to a risk-off asset… I think we're going back to deflation and the best way to get deflation is get a spike up in prices and then flush them, and that's what we're doing. We're in the early days of flushing. You just look at the stock market. The fact that it's facing more and more tightening and it's already down 30% is something most people who have invested in the last 40 years have not seen. This is the new world."

He is convinced that while the technology behind digital currency is still maturing, it is certainly going to be a vital technology in the future and that if investors can hold out and think five or 10 years ahead, they will see assets like Bitcoin become invaluable. "This asset is a revolution in the ability to store transactions and transmit value. There is no asset that I have ever seen, no one has seen in the history of mankind that's more fluid, more tradable, with price discovery on a 24-7 basis than Bitcoin. And that has value and it's just starting to pick up."

If past market history within crypto has shown us anything, it's that crashes are merely better entry points for its likely surge in the future.