Bloomberg Analyzes Bitcoin’s Striking Resemblance to the 1930 Stock Market Crash

Mike McGlone, senior macro strategist at Bloomberg Intelligence, presents a warning as Bitcoin’s stratospheric rise continues to enthrall investors worldwide. McGlone compares Bitcoin’s spectacular rise to the 1929 stock market bubble, raising questions about the trajectory now taking place.

Historical Echoes

McGlone’s caution is supported by analogies from the past. He emphasizes how the extraordinary growth of Bitcoin is comparable to the stock market’s spectacular rise in 1929, immediately before the catastrophic crash. He draws attention to the unsettling parallels between the two situations.

Interest Rates and Stock Market

The current high-interest rate environment, which McGlone believes is reminiscent of the circumstances before to the stock market disaster of 1930, is what especially concerns him. He notes that “the high-interest rate environment reminds him of the conditions that led to the collapse of the stock market in 1930.”

He shows this idea with a graph showing how the US discount rate peaked in 1929, the same year that the Dow Jones Industrial Average (DJIA) experienced a turning point. The interest rate charged to banks on loans obtained from the Federal Reserve is represented by the US discount rate. This historical information issues a strong caution.

Bitcoin as a Leading Indicator

McGlone compares the function of Bitcoin now to the warnings given by statistician and businessman Roger Babson before to the 1929 stock market disaster. Long before noted economist Irving Fisher famously declared a “permanently high plateau” in 1929, Babson had expressed worries about inflated equities prices. McGlone thinks that, like Babson’s warnings did back then, Bitcoin, one of the best-performing assets in history, acts as a leading indication.

McGlone also highlights the similarities between the ascent of Bitcoin and the development of innovative technology in the 1920s. At that time, the world was being transformed by inventions like electricity, vehicles, air travel, and telephones. The exponential growth of transformational technology and the rise of bitcoin are related.

Fed’s Role

The Federal Reserve’s position is one significant point McGlone emphasizes. The Federal Reserve kept interest rates low in the 1920s despite the emergence of novel technology and a frenzied stock market. In contrast, the Federal Reserve is boosting interest rates in the current economy. This difference could have a big effect on the result.

McGlone’s words of warning serve as a reminder of the dangers that might arise from Bitcoin’s rapid ascent, but only time will tell if the cryptocurrency industry is actually experiencing a bubble similar to the 1929 stock market boom.

According to CoinMarketCap data, Bitcoin is currently trading at USD 25,988.80.