In a recent analysis, Bloomberg senior commodity strategist, Mike McGlone, delved into the current state of Bitcoin and other cryptocurrencies. McGlone pointed out that the growing proliferation of digital assets could be exerting downward pressure on Bitcoin performance.

McGlone made a compelling argument that the increasing number of alternative cryptocurrencies (altcoins) is adversely affecting Bitcoin price. He aptly likened the situation to riding an escalator of liquidity upwards while simultaneously descending in a Fed tightening elevator. This analogy vividly captures the dynamic between the roughly 10,000 cryptocurrencies listed on platforms like CoinGecko and their decreasing correlation with federal funds futures (FF13) over the past year, particularly in relation to small market cap cryptocurrencies relative to Bitcoin.

The rapid expansion of these "copycat" digital assets, as estimated by McGlone at approximately 10,000, can be attributed to an exceptional period of near-zero interest rates. Nevertheless, the strategist emphasizes that this trend is swiftly undergoing a reversal.

McGlone analysis further highlights that since 2018, Bitcoin has generally outperformed the MarketVector Digital Assets 100 Small Cap index, particularly during phases when the Federal Reserve has implemented monetary tightening policies. However, he issues a cautionary note, suggesting that the rapid wealth creation within the cryptocurrency ecosys-tem is now reversing, and this trend may continue to exert a negative influence on Bitcoin performance for the foreseeable future.

Please note that this analysis is not intended as investment advice.

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