According to Standard Chartered, Bitcoin can fall to $5,000 in 2023 in a surprise for the market that investors are under-pricing the virtual currency.

If that level is reached, it will represent a roughly 70% drop from Monday’s price of slightly more than $17,000 for one bitcoin.

Standard Chartered outlined a number of possible scenarios that “we believe are under-priced by the markets” in a note titled “The financial-market surprises of 2023.”

“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.

The rather extreme circumstances, according to Robertsen, “have a non-zero probability of occurring in the year ahead, and… fall materially outside of market consensus or our own baseline views.”

Bitcoin has so far dropped more than 60% so far in 2022, after a series of high-profile venture and company failures. The most recent and significant victim is cryptocurrency exchange FTX, which has declared bankruptcy. The blowback from FTX is still spreading throughout the market.

According to Robertsen, the fall in bitcoin’s value will correspond with a rally in gold, with the yellow metal possibly rallying 30% to $2,250 per ounce “as cryptocurrencies fall further and more crypto firms succumb to liquidity squeezes and investor withdrawals.”

According to Robertsen, gold may re-establish itself as a safe haven, with investors migrating to the commodity for security during 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.

The view of Standard Chartered isn’t the only one that is bearish on bitcoin. Veteran investor Mark Mobius predicted last week that bitcoin will fall to $10,000 by 2023 as interest rates rise and the US Federal Reserve tightens monetary policy.

Nevertheless, there are still individuals who are bullish on bitcoin. Tim Draper, a venture capitalist, stated on Saturday that he believes bitcoin will reach $250,000 next year.

(Adapted from LiveMint.com)

Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability