(Bloomberg) – Speculators clinging to the view that the crypto routine is mostly over are in for a rude awakening in 2023, according to Standard Chartered.
Most read by Bloomberg
Another roughly 70% Bitcoin plunge to $5,000 next year is among “surprise” scenarios that markets could be “undervalued,” Eric Robertsen, the bank’s global head of research, wrote in a note on Sunday.
Demand could switch from bitcoin as the digital version of gold to the real thing, leading to a 30 percent rally in the yellow metal, Robertsen also said.
That possible outcome includes a reversal in rate hikes as economies struggle, and more crypto “busts and a collapse in investor confidence in digital assets,” Robertsen added.
He emphasized that he is not making any predictions, but instead is outlining scenarios that are materially outside of the current market consensus.
The question of what lies ahead for digital assets has arguably never been more difficult to answer following the collapse of Sam Bankman-Fried’s FTX exchange and sister trading house Alameda Research. The tremors spreading from the blast threaten to plunge more crypto companies and Buffet token prices.
For some, much of the bad news may already be reflected in a more than 60% plunge in Bitcoin and a benchmark for the top 100 tokens over the past year.
“Our base case is that most forced sales are over, but investors may not be compensated for the immediate market risk incurred,” Sean Farrell, Fundstrat’s head of digital asset strategy, wrote in a note on Friday.
Farrell pointed to the ongoing uncertainty surrounding Digital Currency Group, the parent company of embattled crypto broker Genesis. Genesis’ creditors are looking at options to keep the brokerage firm from going bankrupt.
The story goes on
Golden outlook
Standard Chartered’s Robertsen said the surprise market scenario of gold surging on crypto pullbacks could see the precious metal rally to $2,250 an ounce.
“Gold will benefit from the crypto woes going forward, with the sudden loss of confidence in the crypto ecosystem,” said Nicholas Frappell, global head of institutional markets at ABC Refinery in Sydney.
The crypto sector continues to shrink. For example, digital asset exchange Bybit plans to cut its workforce by 30%, the latest in a series of layoffs hitting the industry.
More pain may be ahead: About 94% of respondents to Bloomberg’s MLIV Pulse poll believe that post-FTX bankruptcy more explosions will follow as years of easy credit give way to a tougher business and market environment.
Bitcoin is pretty stable right now. The largest virtual coin is up as much as 1.8% on Monday, trading at a three-week high of around $17,340 as of 2:35 p.m. in Tokyo. Tokens like Ether, Solana, and Polkadot also gained.
For crypto market prices: CRYP; for top crypto news: TOP CRYPTO.
–With the support of Sing Yee Ong.
Most Read by Bloomberg Businessweek
©2022 Bloomberg LP