The senior commodity strategist is bullish on Bitcoin, revealing on Oct. 18 that its relative discount to hash rate has hit levels not seen since the first quarter of 2020.
Bloomberg Intelligence senior commodity strategist Mike McGlone says Bitcoin's (BTC's) relative discount to its high hash rate in October — the largest since the first quarter of 2020 — could soon see Bitcoin return to "its propensity to outperform most assets."
In an Oct. 19 Twitter post, the Bloomberg analyst suggested that Bitcoin's ever increasing hash rate — a measure of the processing power and security of a blockchain — relative to its price points "to risk/reward leaning favorably."
Many believe that in theory Bitcoin's hash rate should go up relative to its price.
McGlone pointed to a graph noting that the 10-day average of Bitcoin’s hash rate in October is “roughly equivalent” to the level it should be at around $70,000. However, the price is instead currently at $19,500 as of Oct. 18.
McGlone noted that such a large gulf between the price and the hash rate was last seen during the “1Q 2020 swoon" — a dip that preceded a meteoric climb that lasted through 2020 and 2021.
McGlone tipped that it was possible we are now seeing a “similar price foundation forming now."
The Bloomberg analyst, known to be a perma bull, said that the high rash rates, along with rising demand, adoption and regulation means Bitcoin could be entering an "inexorable phase of its migration into the mainstream and at a relatively discounted price."
In a separate post on Linkedin, McGlone said it "may be a matter of time" before Bitcoin returns to its propensity to outperform most major assets, commenting:
"Returning to its propensity to outperform most assets may be a matter of time, as mainstream adoption progresses and adaptive changes in US accounting standards give it a lift."
McGlone also said Bitcoin’s price “should continue to rise over time” given the laws of supply and demand, adding that the cryptocurrency is showing signs of "bottoming" in 4Q 2022.
Related: Bitcoin likely to transition to a risk-off asset in H2 2022, says Bloomberg analyst
“It's little surprise that a relatively new asset that had skyrocketed has declined due to the rapid pace of Federal Reserve tightening in 2022, but Bitcoin is showing signs of bottoming and divergent strength in 4Q," he explained.
Previously the Bloomberg analyst has suggested that BTC is a "wild card" which is "ripe" to outperform once traditional stocks finally bottom out, and predicted that BTC had the potential to reach $100K in 2022 as the digital currency completes its transition from a risk-on to a risk-off asset.
