Quick Summary
- According to Standard Chartered, bitcoin could fall to $5,000 next year, a 70% drop from its current level of about $17,000, in a market surprise that investors are under-pricing.
- Standard Chartered outlined a number of scenarios it believes are under-priced in its note “The financial-market surprises of 2023.”
- As yields rise and technology stocks plunge, Standard Chartered predicts bitcoin selloffs will accelerate, causing more bankruptcies and collapses.
Massive Drop
Standard Chartered predicts bitcoin will drop to $5,000 next year as investors under-price the cryptocurrency. Upon reaching that level, bitcoin’s price would plunge roughly 70% from Monday’s price of just over $17,000. “We feel the markets are under-priced” according to Standard Chartered’s note on “The financial-market surprises of 2023.”
“Yields plunge along with technology shares, and while the Bitcoin sell-off decelerates, the damage has been done. In the note Sunday, Eric Robertsen, global head of research at Standard Chartered Bank, said more crypto firms and exchanges are experiencing insufficient liquidity, which will lead to further bankruptcies and a collapse of investor confidence in digital assets.”
Robertsen said the somewhat extreme scenarios “have a non-zero probability of occurring in the year ahead, and … fall materially outside of the market consensus or our own baseline views.”
Since a string of high-profile collapses plagued the industry this year, Bitcoin has fallen over 60%. A cryptocurrency exchange has filed for bankruptcy, making it the latest and biggest casualty. In the aftermath of FTX, the market continues to be affected by the fallout.
Gold Rally
The drop in bitcoin’s price will also coincide with a rally in gold, Robertsen said, arguing the yellow metal could potentially rally 30% to $2,250 per ounce “as cryptocurrencies fall further and more crypto firms succumb to liquidity squeezes and investor withdrawals.”
When markets become volatile, Robertsen says gold could reestablish itself as a safe haven for investors.
“The 2023 resurgence in gold [also] comes as equities resume their bear market and the correlation between equity and bond prices shifts back to negative,” he added.
The Standard Chartered view is not the only one that is bearish on bitcoin. CNBC reported last week that Mark Mobius believes bitcoin will fall to $10,000 in 2023 due to rising interest rates and tighter monetary policy from the Federal Reserve.
Some people, however, still believe bitcoin is a good investment. According to Tim Draper, a venture capitalist on CNBC, bitcoin could reach $250,000 by year’s end.
Conclusion
These are certainly difficult times for Bitcoin and the crypto market, as there are many negative fundamentals, such as the collapse of FTX and the lack of liquidity of various crypto exchanges.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
