A report by US investment bank Stifel says bitcoin could drop to the $10,000 level by 2023.
Business Insider highlights bank Stifel’s Barry Bannister report that shows if Bitcoin faces these three macroeconomic factors it can fall to as low as $10K.
1) Bitcoin as a Global Money Supply
According to Bannister, both the S&P 500 and bitcoin fluctuate with global money turned into dollars, but bitcoin is more volatile. If the dollar strengthens, the money supply M2 (M2 is a measure of the money supply that includes cash, checking deposits, and easily-convertible near money) declines, which could tighten US financial conditions. A highly speculative asset like bitcoin would likely drop significantly if US economic conditions worsen.
2) The impacts of the US interest rate and the prices of gold and oil
According to the report, if the US 10-year real interest rate rises inflation due to the Fed’s monetary policy of boosting the interest rate, it will restrain bitcoin’s upside potential. If that real interest pushes the price of gold down — as bonds are the safest assets — it also puts pressure on the Bitcoin price, Stifel claims.
“If bitcoin divided by gold falls to the low end of its range (Fed tightens), bitcoin could drop to $10,000 by 2023.” the analysis added.
3) The Fed’s effect on the stock market
Bannister believes that 10-year rates will not rise more than 80 bips (basis points) in 2022, the first of two years of the Fed’s tightening monetary policy cycle. However, the S&P500 and bitcoin could plummet in 2023 as the Fed continues its actions. “the S&P 500 (and bitcoin) break down in 2023 as Fed keeps going; this is part of ‘equity risk premium.’ Bitcoin likes a lower equity risk premium, so watch if Fed exit raises equity risk premium (bearish bitcoin) or lowers equity risk premium (bullish),”
Bitcoin is trading at $40,000, after peaking at $69,000 in November last year; despite the Stifel concerns, other analysts see crypto as a store of value against inflation, as is the case with the CEO of Pantera Capital, who stated, “Rising rates will make equities and real estate less attractive. So, where to invest when stocks and bonds are falling? Blockchain is a very legitimate place to invest in this scenario.”
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