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Crypto Crash May Signal Economic Turmoil, Deflation

Coin WorldSunday, Apr 27, 2025 11:17 am ET
1min read

Bloomberg Senior Commodity Strategist Mike McGlone has warned that a cryptocurrency crash could signal impending economic turmoil and deflation. He drew parallels with historical events such as the 1929 United States stock market crash, Japan’s 1989 bubble, and the early 2000s Dot-com bubble, suggesting that the current fragility in the crypto market might indicate deeper systemic issues.

McGlone highlighted the 200-day moving average of the U.S. Treasury 10-year yield, which is nearing its lowest point in nearly two decades. He cautioned that if cryptocurrencies break down, it could be a warning sign of deflation, following the largest money pump in history during the pandemic years. This period saw massive liquidity injections, inflating asset prices across the board.

McGlone emphasized the unique role of Bitcoin, noting that its historic rally, which began in 2009 as the stock market bottomed, could now be reversing. The explosive growth in the number of cryptocurrencies, many of which rely on Bitcoin’s strength, adds to the market’s fragility. A crash in crypto markets could signal the end of the era of easy money, potentially triggering sharp asset deflation and broader market turmoil.

Ask Aime: Why should retail investors worry about the potential crypto market crash?

Analysts remain concerned about a possible market downturn, warning of a potential recession in 2025 driven by uncertainty from trade tariffs. The interconnectedness of the financial system means that a significant drop in crypto values could lead to a loss of confidence in other asset classes, potentially triggering a broader economic downturn. This volatility highlights the sensitivity of the crypto market to external shocks, making it a potential early warning system for broader economic trends.

The crypto crash could also have implications for the banking sector, as some financial institutions have begun to offer crypto-related services. A sudden drop in crypto values could lead to a loss of confidence in these institutions, potentially triggering a bank run or other forms of financial instability. This risk is particularly acute for institutions that have taken on significant exposure to crypto assets.

In conclusion, the crypto crash could serve as a warning sign for the broader economy, highlighting underlying weaknesses and potential areas of vulnerability. While the crypto market is still relatively small compared to traditional financial markets, its interconnectedness with other asset classes means that a significant crash could have far-reaching consequences. As such, policymakers and investors should pay close attention to developments in the crypto market and be prepared to take action if necessary.

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KookyPossibleTheme
04/27
Easy money era ending? Brace for impact, folks.
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CommonEar474
04/27
Crypto crash = economic red flag? 🚩 Might be time to hedge bets and diversify, folks. $AAPL and bonds anyone?
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MirageCommander
04/27
@CommonEar474 What’s your plan for $AAPL? Long-term hold or quick trade?
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auradragon1
04/27
Crypto crash could be a canary in coal mine.
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abdul10000
04/27
Liquidity injections made assets pop. Now, the bubble might burst. Get ready for the crypto rollercoaster ride.
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Surfin_Birb_09
04/27
Crypto crash could be like canary in coal mine. Policymakers ignoring it might regret.
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LabResponsible7389
04/27
@Surfin_Birb_09 True dat, bro.
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_punter_
04/27
Easy money era ending? Crypto crash could be the canary singing its last song. Brace for impact, y'all.
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doodaddy64
04/27
@_punter_ What's your exit plan?
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EL-Vinci93
04/27
Banking sector exposure got me nervous. If crypto tanks, could we see a bank run? Time to watch closely.
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Halfadrako67
04/27
@EL-Vinci93 Yeah, bank exposure's risky. Crypto drop could spook folks, leading to a bank run. We're talking potential instability for banks that bet big on crypto. Keep a close watch on this.
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nirvana6789
04/27
@EL-Vinci93 Yeah, could get spicy.
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FluidMarzipan1444
04/27
Bitcoin's like the canary in the coal mine. If it drops, we might be heading for a darker market. 🦜
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FaatmanSlim
04/27
@FluidMarzipan1444 Yup, BTC's a bellwether.
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qnscitizen
04/27
@FluidMarzipan1444 What happens if BTC tanks?
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bottlethecat
04/27
Deflation vibes? Sounds scary, but also kinda like a reset button for overpriced assets.
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Local-Store-491
04/27
Recession whispers in 2025 got me thinking about risk management. Anyone else tightening their portfolios?
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MrScary420
04/27
@Local-Store-491 What specific assets are you considering tightening up on? Any particular sectors or stocks that have you worried?
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abdul10000
04/27
Policymakers better keep eyes on crypto. A crash could be their warning sign. Investors, stay sharp and adapt.
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notme1234510
04/27
@abdul10000 What if regulators step in?
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RYDrDIE
04/27
@abdul10000 Totally agree, crypto's a canary.
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ButterscotchNo2791
04/27
200-day moving average is a spooky low. If yields spike, deflation could chill us. Stay vigilant, traders.
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SuperNewk
04/27
Bitcoin's pumping, but deflation risks got red flags.
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BenGrahamButler
04/27
Crypto's fragile, like a house of cards. 🤔
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Conscious_Shine_5100
04/27
Crypto's fragility is wild. One drop could shatter investor confidence. Could ripple effects hit $TSLA next?
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