Taking on 7 times the risk without excess returns—has the crypto market cycle inflection point arrived?

On the last day of the year, Bloomberg analyst Mike McGlone has released another “big move.” He pointed out that the risk-adjusted performance of crypto assets underperforms global stocks, which may be signaling that this rapid rise in risk assets is nearing its end. This view has sparked widespread discussion in the market and prompted many to reevaluate the risk-reward ratio of the crypto market.

The “Embarrassing” Truth About Risk-Adjusted Performance

McGlone’s core argument is straightforward: from the end of 2017 to December 30, the Bloomberg Galaxy Crypto Index (BGCI) increased by approximately 90%. While this gain looks good, the problem is that this increase is only comparable to the total market capitalization growth of global stocks. More painfully, the annual volatility of crypto assets is about seven times higher than that of global stocks.

In investment terms, this means you are taking on significantly higher risk without obtaining corresponding excess returns. This is indeed a question worth pondering. If risk is the price of return, then high risk should come with high reward, but current data shows that this “trade” is not cost-effective.

How Reliable Is McGlone’s Competitor Argument?

McGlone further explains his logic: gold has only three main competitors (silver, platinum, palladium), whereas Bitcoin faces competition from millions of digital assets. Therefore, Bitcoin’s relative position is inevitably weakened.

This argument sounds reasonable, but the market generally considers it an overstatement. The reason is simple: Bitcoin’s status in the crypto world is already established. Its consensus mechanism, liquidity, and institutional allocation weight cannot be replaced by other altcoins. Saying “your grandpa is still your grandpa” may be colloquial, but it reflects market reality.

More importantly, McGlone’s prediction record is not perfect:

This casts doubt on his latest forecast (BTC dropping to $50,000 or even $10,000 by 2026).

What Is the Market’s True Signal?

However, we shouldn’t dismiss McGlone’s warnings just because of past prediction inaccuracies. In fact, the market is indeed sending some noteworthy signals:

• Bitcoin retraced from its October high of $126,000 to $88,000, a 30% decline
• Gold remains strong, the US dollar weakens, and Fed rate cut expectations are rising
• Crypto assets have underperformed in this rally

But does this mean the cycle is truly over? The question is more complex. On one hand, the risk-adjusted performance is indeed mediocre, warranting caution; on the other hand, a weakening dollar and expectations of rate cuts could provide new upward momentum for crypto assets.

Summary

McGlone’s view touches on a real issue: the current risk-reward ratio of crypto assets is indeed less than ideal. However, his logic based on the number of competitors has limitations, and his past prediction accuracy is also questionable. The market faces genuine cyclical adjustment pressures but also macro opportunities. The key is to recognize the risks while also seeing the opportunities — this is the attitude that rational investors should adopt.