Bitcoin could drop to $5,000 next year in a market surprise that investors are under-pricing, according to Standard Chartered.
If that level is reached, it would mark a roughly 70% plunge from Monday’s price of just over $17,000 for one bitcoin.
In a note entitled “The financial-market surprises of 2023,” Standard Chartered outlined a number of possible scenarios that “we feel are under-priced by the markets.”
“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 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.”
Bitcoin has already fallen more than 60% this year after a string of high-profile collapses of projects and companies plagued the industry. The latest and biggest casualty is cryptocurrency exchange FTX which has filed for bankruptcy. Contagion from the fallout of FTX continues to spread through the market.
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.”