Bitcoin seen falling lower before rising

Billionaire Tim Draper has said bitcoin (BTC) could hit $250,000 next year, while renowned investor Mark Mobius counters that it could crash to $10,000. Who is right ?

Everyone’s guessing it, but for now, the world’s largest cryptocurrency and the beleaguered cryptocurrency market it helped usher in are likely to remain in the doldrums for much of next year. , if not, more.

Speaking at the Web Summit tech conference in Lisbon earlier this month, Draper stuck to his forecast by mid-2023, despite initially predicting the currency would hit a quarter of a million. dollars by the end of 2022. The financier noted a flight in quality will occur in the coming months, fueling demand for bitcoin and turning other alternative coins into “relics.” Women, who have remained on the fringes of bitcoin, will also start buying, further driving up its price, Draper told CNBC.

In contrast, Mobius, who has made a name for himself as an expert on emerging markets, noted that bitcoin will plunge to $10,000 after breaking the $17,000 technical level as higher interest rates will return the holding of cryptocurrencies, which no longer pays interest after a series of bankruptcies of crypto lenders. , unattractive.

“I’m much more in the Mobius camp and think bitcoin can go even lower,” said Matthew Tuttle, CEO of Tuttle Capital Management. “Claims that bitcoin is a catalyst or an alternative to precious metals or other currencies, that it’s not correlated to stocks, what people were saying when it was at 60,000, are out the window. .”

Israeli digital asset investor Yaniv Feldman agreed that bitcoin will remain under pressure amid several headwinds, including the collapse of FTX and the Federal Reserve’s interest rate hike campaign, which wiped out around 1 $.3 trillion from the digital currency market this year. “I don’t see anything happening in 2023 except bitcoin dropping even lower,” Feldman predicted.

Two scenarios

Still, Feldman sees the potential for the cryptocurrency to rebound strongly in the medium to long term, also as he believes peer-to-peer or blockchain decentralized finance will continue to hold future value.

“It will happen in one or two cases: in the first case, the world economy will collapse due to instability. The dollar will fall, losing its reserve status and people will revert to gold or another reserve currency, which could be bitcoin,” he said. “The second is that the US economy can rebound and avoid bankruptcy. Growth then returns and we see greater demand for bitcoins.”

According to Feldman, bitcoin continues to show promise as a store of value, while decentralized or non-government-controlled currency will continue to gain traction against the advent of central bank digital currencies (CBDCs).

“Fiat does not fulfill the role of a decentralized and autonomous store of value,” he said. “Countries can print whatever they want and potentially freeze digital wallets (CBDC). When this happens, the ability to store value beyond the reach of banks or countries will be even greater.”

“Very careful”

Blockchain consultant Merav Ozair said people have become “very cautious” about bitcoin until they see more data on how the US recession will play out. FTX aside, other recent bankruptcies such as those involving crypto lenders Celsius, Voyager, and Blockfi, which once offered unrealistic rates for crypto deposits, have also angered investors. To make matters worse, fears that Binance, the world’s largest digital currency exchange, may follow FTX’s steps, are also worrying the markets.

“A miracle will have to happen for bitcoin to shoot for the moon next year,” Ozair said, noting that Draper’s forecast was based more on hype than fundamentals. “We’re going to be down for a while. The idea that it’s all going to go up just isn’t going to happen.”

If Binance, which is currently under investigation over market manipulation issues and questionable finances, goes bankrupt, “another show will fall,” potentially taking bitcoin down to $5,000, Ozair added. Meanwhile, there are plenty of developments happening in the space as some institutional (buying heavily discounted assets) and retail players are sticking to bets that the digital currency market can take a turn.

“There’s a lot of development going on with more metaverse and decentralized tech projects to come,” Ozair said, adding that Starbucks and Warner Music are also making inroads into non-fungible tokens (NFTs), joining BlackRock, Goldman Sachs and others. and PayPal, which have bolstered engagements in the space.

Gain from short sellers

If institutional participation deepens next year and the U.S. can orchestrate a soft landing, bitcoin could surge above $20,000, Ozair said. So far, however, short-sellers are bolstering bets against bitcoin with CME Group’s January 2023 derivatives swaps priced below its spot price. Bitcoin was hovering at $16,500 at press time after flirting with $70,000 in November last year.

Tuttle is also preparing to bet against Bitcoin proxies. It waits for Coinbase and/or miner Marathon Digital to rally to their 10, 20 or 50 day moving averages to take a short position. “If they break through those resistance levels, we’ll be looking to short the rally,” he said.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.