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Point of Focus
- McGlone warns crypto faces pressure whether stocks rise or fall.
- High rates could restrict liquidity for Bitcoin and other digital assets.
- US stock valuations are approaching dot-com-era extremes.
Cryptocurrencies could struggle whether US stocks continue rising or suffer a correction, as restrictive monetary policy and historically stretched equity valuations create a “lose-lose” environment, according to Bloomberg Intelligence strategist Mike McGlone.
McGlone said the Bloomberg Galaxy Crypto Index (BGCI) has delivered weak performance relative to broader risk assets since 2017 despite experiencing roughly four times as much volatility.
Its strong correlation with the S&P 500 could now leave crypto unusually exposed to the direction of US equities.
Higher rates challenge crypto
McGlone contrasted current conditions with 2020 and 2021, when near-zero interest rates and massive liquidity injections helped fuel crypto’s strongest rally.
Fed funds futures one year ahead approached zero in 2020. They now sit near 4.70%, reflecting expectations that borrowing costs will remain elevated.
Cryptos May Face a Lose-Lose vs. Fed, Stocks
The Bloomberg Galaxy Crypto Index (BGCI) has performed poorly since 2017, flatlining vs. beta despite trading with about 4x the volatility. Will that change? Stocks could be the driver. My graphic highlights BGCI's glory days in 2021… pic.twitter.com/iAyVGsHByS
— Mike McGlone (@mikemcglone11) September 20, 2026
The US Federal Reserve last week raised its benchmark rate by 25 basis points to 3.75%-4.00%. Policymakers’ projections also indicated that rates could remain around 4.1% through the end of 2027, reducing expectations for rapid policy easing.
Higher rates make government bonds and other lower-risk assets more attractive while increasing the opportunity cost of holding volatile cryptocurrencies.
If inflation remains persistent, the Fed may keep monetary conditions restrictive, limiting liquidity available to Bitcoin and the broader market. If tight policy instead triggers an economic slowdown or equity selloff, crypto could fall alongside other risk assets.
Stock valuations approach historic extremes
It’s also worth highlighting US stock-market capitalization relative to GDP, which has climbed to its highest level in about a century. Market capitalization relative to public debt is near a 25-year high.
Other valuation measures reinforce the warning. The S&P 500’s Shiller CAPE ratio stands near 41, approaching the 44.2 peak recorded during the dot-com bubble.
It is true that Robert Shiller's CAPE is was up above 40. But some understanding of the math is helpful. CAPE averages monthly earnings going back 10 years. So when there is a big recent surge in earnings, and prices, CAPE does not keep up very well.
If we look at a raw trailing… https://t.co/peVWdCWYpy pic.twitter.com/plq0deriDY
— Tom McClellan (@McClellanOsc) September 18, 2026
These levels do not guarantee an imminent market crash, but they leave equities more vulnerable to disappointing earnings, persistent inflation, or rising bond yields.
With crypto closely linked to stocks, any sharp correction could produce even larger losses across digital assets because of their higher volatility.
Crypto’s risk-adjusted returns under pressure
McGlone questioned whether crypto investors have received sufficient returns to justify the market’s volatility.
He also warned that the BGCI contains survivor bias because failed cryptocurrencies disappear while new tokens continue entering the market.
Bitcoin’s (BTC) recovery toward $82,000 offers a counterpoint to the bearish case.
However, weakening exchange-traded fund (ETF) flows, slower stablecoin growth, and reduced corporate buying indicate that underlying demand remains fragile.
McGlone’s scenario is not inevitable, but it frames crypto’s central macro risk: Rising stocks could sustain inflation and keep the Fed restrictive, while falling stocks could trigger a broader flight from speculative assets.
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