Could bitcoin fall to a low of $10K? According to Stifel’s Barry Bannister, traders could witness the world’s number one digital currency by market cap dip to a price that’s roughly three times less than what it’s at right now.
Bannister Predicts Bad Things for BTC
Bitcoin has been experiencing some bearish trends as of late. While the currency has recovered somewhat, the asset recently fell into the mid-$30,000 range, which was about 40 percent less than the price it was trading at in November of last year. Now, the currency has risen back into the $40,000 range, and many felt that BTC was likely making a comeback of sorts, though according to Bannister, the world of bitcoin may experience further stumbles in the coming year.
Bannister predicts that bitcoin could fall 76 percent and hit $10K by the time 2023 rolls along. The things that could potentially contribute to bitcoin’s drop are the global money supply, the ten-year U.S. Treasury yield, and the equity risk premium of the S&P 500. He says that all these elements have heavy influence over where the price of bitcoin moves. He says that with interest rates rising so fast, the BTC price could be negatively impacted in the coming future.
In an interview, he stated:
In 2022, we see bitcoin in a broad trading range bounded by year-to-date intraday levels with greater downside risk in 2023 if the Fed continues to normalize policy in a ‘standard’ two-year tightening cycle.
When it comes to bitcoin as a function of global money supply, he commented:
Both the S&P 500 and bitcoin move with global money translated into dollars. Bitcoin just moves more… If the dollar strengthens, then global M2 money growth slows, which could tighten US financial conditions. If US financial conditions tighten, a high-powered speculative asset like bitcoin would likely fall significantly.
Regarding bitcoin as a function of the real ten-year yield, the gold price, and the oil price, he says:
If ten-year real (after inflation) TIPS US Treasury yield… rises due to Fed tightening… it restrains bitcoin upside, and if the rising 10Y TIPS yield pulls gold lower, that also pressures bitcoin. If bitcoin divided by gold falls to the low end of its range (Fed tightens), bitcoin could drop to $10,000 by 2023.
What Could Cause Such a Stumble?
When it comes to bitcoin as a function of how far the Fed can go before cracking stocks, he said:
We believe the 10Y real yield rises no more than 80 basis points in 2022, the first year of a two-year Fed tightening cycle, but then the S&P 500 (and bitcoin) break down in 2023 as the Fed keeps going. This is part of ‘equity risk premium.’ Bitcoin likes a lower equity risk premium, so watch if the Fed exit raises equity risk premium (bearish bitcoin) or lowers equity risk premium (bullish).