Speculators cleaving to the view that the crypto rout is in general over are at risk of a rude awakening in 2023, in accordance to traditional Chartered.
A further 70% drop in Bitcoin to $5,000 next year is one of the "surprise" scenarios that markets may be "under-pricing," according to the bank's Global Head of Research Eric Robertsen in a note published on Sunday.
According to Robertsen, demand for Bitcoin as a digital version of gold could shift to the real thing, resulting in a 30% increase in the yellow metal.
This could result in a reversal of interest-rate hikes as economies struggle, as well as more crypto "bankruptcies and a collapse in investor confidence in digital assets," according to Robertsen.
He emphasised that he was not making predictions, but rather considering scenarios that are materially different from current market consensus.
Following the demise of Sam Bankman-FTX Fried's exchange and sister trading house Alameda Research, the question of what lies ahead for digital assets has arguably never been more difficult to answer. The tremors caused by the explosion threaten to topple more crypto companies and disrupt token prices.
Some believe that much of the bad news has already been reflected in a more than 60% drop in Bitcoin and a gauge of the top 100 tokens over the last year.
"Our base case is that most forced selling is over, but investors may not be compensated for the market risk incurred in the short term," Sean Farrell, Fundstrat's head of digital asset strategy, wrote in a note Friday.
Farrell emphasised the ongoing uncertainty surrounding Digital Currency Group, the parent company of the embattled cryptocurrency brokerage Genesis. Creditors of Genesis are looking for alternatives to keep the brokerage from going bankrupt.
Prospects for Gold
According to Standard Chartered's Robertsen, the unexpected market scenario of gold surging as crypto retreats could see the precious metal reach $2,250 per ounce.
"With the sudden decline in confidence in the crypto ecosystem, gold will benefit going forward," said Nicholas Frappell, global head of institutional markets at ABC Refinery in Sydney.
The crypto sector is continuing to contract. For example, the digital-asset exchange Bybit intends to reduce its workforce by 30%, the latest in a string of layoffs in the industry.
More pain is possible: 94% of respondents to Bloomberg's MLIV Pulse survey believe that more bankruptcies will follow FTX's bankruptcy as years of easy credit give way to a tougher business and market environment.
Bitcoin is currently fairly stable. As of 2:35 p.m. in Tokyo, the largest virtual coin had risen as much as 1.8% and was trading at a three-week high of about $17,340. Ether, Solana, and Polkadot were also successful.
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