Macro guru Luke Gromen says a potential March 2020-style market capitulation could shake up Bitcoin and financial markets in the near future, before any sort of liquidity-driven rally arrives.
Sudden AI Deflation Could Cause COVID-Like Stock Market Crash, Says Investor Luke Gromen
Speaking to investors on his YouTube channel, Luke Gromen, founder of market research firm FFTT, says that while an inflationary wave is becoming increasingly likely, there is an “order of operations” that must be considered.
While many analysts expect a multi-year money printing-driven bull market and perhaps near consensus, Gromen warns that there will likely be a sharp correction beforehand, potentially triggered by the growth of artificial intelligence (AI).
He compares the scenario to that of March 2020, when the stock market crash ended up justifying the stimulus measures that ultimately caused an explosive rally in virtually all risk assets.
Gromen said:
“Bitcoin, I think eventually, of course, it will do very well. But bitcoin still trades as a high beta tech stock, that’s just a fact. And if we get AI-driven deflation, unless bitcoin starts trading as a reserve asset, then I think the faster AI goes, the more risk there is that bitcoin will do a March 2020 COVID-type thing. It went from what, 15 $5,000 to $5,000 pretty quickly? It’s not my base case, not to $5,000, but I’m just talking about this type of deflation decline before the print starts.
Learn more: Bitcoin price action tightens as indicators suggest fatigue
Gromen adds that he is still confident that liquidity will be added in “very significant amounts,” but he says charting the right course is important and perhaps overlooked.
Between February and March 2020, Bitcoin fell approximately 61%, from $10,400 to $3,800 before rebounding in a historic bull run to $65,000. From current levels, a similar move would put bitcoin around $36,000.
FAQs
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What does Luke Gromen warn about Bitcoin and the markets?
Luke Gromen warns that an AI-driven deflationary shock could trigger a sharp, COVID-like market selloff ahead of any liquidity-fueled recovery. -
Why is Gromen comparing this to March 2020?
He argues that a sudden crash could justify a massive rally, in the same way that the 2020 capitulation preceded a historic bull market. -
How could bitcoin be affected in this scenario?
Given that bitcoin is still trading as a high-beta tech asset, Gromen says it could see a sharp decline before monetary easing begins. -
Is Gromen optimistic in the long term?
Yes, he remains firmly convinced that large-scale liquidity will eventually cause markets, including Bitcoin, to rise significantly.
