World leading cryptocurrency bitcoin has experienced its worst decline since early this year, falling from it’s all-time high price of $67,566.83 to $15,698 within a year.
Bitcoin has been touted as the digital gold, and its decline has created conflicting takes on the future of cryptocurrency, with some predicting bullish days ahead while others say the coming year will be more bearish for the embattled coin.
In a note entitled “The financial-market surprises of 2023,” reported on by CNBC, Standard Chartered outlined a number of possible scenarios that “[they] feel are under-priced by the markets.”
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It said that bitcoin could drop to $5,000 next year in a market surprise that investors are under-pricing.
“Yields plunge along with technology shares, and while the Bitcoin sell-off decelerates, the damage has been done. More and more crypto firms and exchanges find themselves with insufficient liquidity, leading to further bankruptcies and a collapse in investor confidence in digital assets,” Eric Robertsen, global head of research at Standard Chartered Bank, said in the note Sunday.
Robertsen added that 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.”
CNBC noted that if bitcoin drops to $5,000, it would mark a roughly 70% plunge from Monday’s price of just over $17,000 for one bitcoin.
Bitcoin’s ordeal was exacerbated by a flurry of issues, including the withdrawal of high-profile institutions such as Tesla, backing the cryptocurrency. Bitcoin’s push to recover has been rocky, compounded by developing events like the collapse of exchanges.
Late last month, one of the biggest crypto exchanges FTX filed bankruptcy, igniting fresh discord that has erased the crypto market’s gain. This has created further doubt about bitcoin’s potential rebound in 2023, sparking investors’ interest in gold as the better asset.
FTX’s founder Sam Bankman-Fried doesn’t know what happened to billions of dollars in Alameda Research accounts. The disgraced founder previously said he’d stepped back from his trading firm’s operations, but in a new interview with The Wall Street Journal Bankman-Fried admitted that he “can only speculate” about what happened to around $5 billion of customers’ money held in Alameda’s accounts. Before FTX’s fall, customers often intended to fund their FTX accounts through Alameda, but that money could have been double counted or lent to Alameda without customers’ knowledge. FTX and Alameda have both filed for bankruptcy and the missing money is a “central” component of the bankruptcy proceedings. (LinkedIn News)
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.”
Robertsen says gold could re-establish itself as a safe haven, with investors flocking to the commodity for stability in times of market volatility.
“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.
CNBC noted that besides Standard Chartered, others have also predicted bearish outlook for bitcoin. It quoted Veteran investor Mark Mobius saying last week that he sees bitcoin falling to $10,000 in 2023 due to rising interest rates and tighter monetary policy from the U.S. Federal Reserve.
However, some investors are still positive that the market will bounce back in 2023. Venture Capitalist Tim Draper told CNBC on Saturday that he thinks bitcoin can hit $250,000 next year. Some other business leaders have made similar projections.