McGlone warns crypto faces lose-lose as Fed hikes and stocks peak

Bloomberg Intelligence strategist Mike McGlone argues that digital assets are trapped in a lose-lose environment, driven by restrictive Federal Reserve policy and US equity valuations approaching historic extremes. The warning comes as Bitcoin ($BTC) recovers toward $82,000 following last week's rate decision, yet faces underlying demand weakness identified by onchain data provider Glassnode.

The Federal Reserve unanimously raised its benchmark rate by 25 basis points to 3.75%-4.00% last week, marking its first increase in more than three years. Policymakers' median projections place the federal funds rate at 4.1% at the end of both 2026 and 2027, indicating another potential hike this year and no median rate cuts next year. McGlone suggests that if inflation persists, the Fed may keep rates elevated or tighten further, restricting the liquidity that has historically benefited speculative assets like Bitcoin.

The second side of the trap involves stretched equity markets. The S&P 500's Shiller CAPE ratio currently stands around 41, near the December 1999 dot-com peak of 44.2 and far above the long-term median of roughly 16.1. Bank of America's normalized S&P 500 P/E recently reached 32, a level that historically corresponds to an average annual return of around -3% over the following decade. Six other Bank of America valuation indicators also imply negative long-term returns, though the bank noted that stronger current corporate fundamentals may make historical comparisons overly pessimistic.

McGlone posits that a sustained 20% correction in the S&P 500 could drive Bitcoin sharply lower, potentially to $10,000 in an extreme downside scenario. This remains his forecast rather than an established statistical relationship between specific stock declines and Bitcoin prices. The concern is that tighter policy breaking the equity rally would trigger a broad risk-off move, causing crypto to lose on the valuation side while remaining constrained by high interest rates.

Market structure data supports the caution. Glassnode reported that Bitcoin recently fell below its True Market Mean, with demand weakening across onchain capital inflows, ETF flows, stablecoin growth, and corporate purchases. The firm described the market as moving into an area of thin support, where fewer recently established cost-basis levels exist beneath the price. In previous weekly data, Bitcoin sat at approximately $76,800, down 4.4%. During that period, spot cumulative volume delta on centralized exchanges shifted from a net outflow of $29.7 million to a net outflow of $142.7 million, indicating a sharp increase in selling pressure.

Leverage remains a factor despite price weakness. Futures open interest stood at $36.4 billion, exceeding Glassnode's statistical upper band of $36 billion. Meanwhile, the US 10-year Treasury yield remains around 4.97%, offering investors unusually high returns outside of speculative assets.

Counterarguments exist regarding Bitcoin's resilience. The asset has recently shown periods of weaker correlation with the S&P 500; CoinMarketCap Research found Bitcoin's short-window correlation had fallen to 0.43 from 0.75 during last week's crypto-specific selloff. Bitcoin's recovery toward $82,000 on Monday, aided by easing oil prices and strengthening global risk markets, suggests some resilience against the recent Fed hike.

However, with weak underlying demand, Treasury yields near 5%, and US stock valuations approaching dot-com-era extremes, the outlook remains precarious. The next test for crypto is whether it can continue climbing without the easy liquidity and booming risk appetite that powered earlier cycles.