Bitcoin Crash Can Lead to Next Major US Recession, Says Bloomberg Expert

Key Insights:

• Extreme U.S. stock valuations, unusually low equity volatility, and a deflating crypto bubble could signal a broader crypto market reversion.
• McGlone outlined downside scenarios of $56,000 for Bitcoin price in a near-term equity pullback and reiterated a longer-term $10,000 base case.
• Market analyst Holger Zschaepitz noted that Bitcoin is trading in tandem with software equities facing AI-driven disruption.

Although the Bitcoin price attempted a bounce back to $70,000, bulls are still struggling for a decisive breakout. Bloomberg expert Mike McGlone noted that a Bitcoin crash may lead to the next US recession. He noted that the crypto market currently signals deeper economic weakness amid a major liquidity erosion.

Bitcoin Crash, The Recipe for US Recession?

Bloomberg expert Mike McGlone cited major cracks in the crypto market that could lead to a US recession. He suggested that equity analysts might call the recent fall a “healthy correction,” following a sharp downturn in digital assets. McGlone noted that the “buy the dip” strategy for crypto markets is nearing its limit.

McGlone pointed to several macro indicators to support his view. U.S. stock market capitalization relative to GDP has climbed to its highest level in nearly a century. On the other hand, the 180-day volatility for the S&P 500 and Nasdaq 100 remains near the lowest levels in eight years.

At the same time, McGlone believes the crypto bubble is unwinding. He also added that the post-election market optimism is fading and volatility is rising.

In a comparative chart, McGlone highlighted Bitcoin (adjusted by dividing by 10) trading near similar levels to the S&P 500 around Feb. 13, with both hovering below the 7,000 mark on his scale.

Bitcoin price and S&P 500 comparison | Source: Mike McGlone

According to McGlone, it would be difficult for Bitcoin price upside to continue if US equities revert back. He suggested an initial reversion toward 5,600 on the S&P 500. Thus, according to his framework, it could push the Bitcoin crash to $56,000. Longer term, he reiterated his base-case scenario that Bitcoin could eventually revert toward $10,000.

Bitcoin Following US Equities?

Market analyst Holger Zschaepitz said Bitcoin is increasingly trading in tandem with software stocks. Top software firms are facing pressure on Wall Street amid accelerating AI-driven disruption.

According to Zschaepitz, the structural shake-up in the software industry may be spilling over into digital assets. He noted that as investors of software firms are facing a liquidation stress, they might be liquidating their BTC holdings to raise cash.

Bitcoin crash with software firms | Source: Holger Zschaepitz

He suggested that a significant number of developers and tech investors hold Bitcoin on their balance sheets or in their personal portfolios. In periods of sector-specific stress, these holders could be using Bitcoin as a source of liquidity. This could also be the reason behind Bitcoin price staying under constant pressure.

Crypto Market Facing Major Liquidity Crunch

Crypto research firm 10x Research has warned that liquidity is quietly exiting the digital asset market. In its latest “Weekly Crypto Kickoff” report, the firm analyzed derivatives positioning, volatility trends, funding rates, ETF and stablecoin flows, as factors affecting Bitcoin and Ethereum.

According to 10x Research, crypto markets are approaching a critical inflection point. Liquidity conditions are weakening even as volatility and sentiment metrics reach extreme levels. Traders have begun unwinding crash hedges, and overall positioning has dropped.

Crypto market liquidity drop | Source: 10x Research

The report noted a growing disconnect between improving macro conditions and crypto’s muted price response. Furthermore, a sharp drop in trading volumes show that the recent rebound is losing momentum. This further raises the chance of a gradual decline.

Total crypto market capitalization currently stands at $2.35 trillion, down 2.1% week-over-week. Average weekly trading volume has fallen to $100 billion, 49% below its typical level. Weekly Bitcoin volume totaled $43.3 billion, 47% below average, while Ethereum volume reached $21.4 billion, down 58% from average levels.

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