How the market got it wrong

The crypto market has been battered this year with over $2 trillion lost since its peak in November 2021. The cryptocurrency has been under pressure following the collapse of major exchange FTX.

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2022 marked the start of a new “crypto winter,” with high-profile companies collapsing across the board and digital currencies prices taking a spectacular plunge. The events of the year took many investors by surprise and made the task of predicting the price of bitcoin very difficult.

The crypto market was flooded with pundits making feverish calls about where bitcoin was headed. They were often positive, although some correctly predicted that the cryptocurrency would sink below $20,000 per coin.

But many market watchers have had a turbulent year for crypto, with high-profile company and project failures that sent shock waves throughout the industry.

It began in May with the collapse of the TeraUSD, or UST, an algorithmic stablecoin that was supposed to be pegged one-to-one with the US dollar. Its failure brought down TerraUSD’s sister token, Luna, and hit companies with exposure to both cryptocurrencies.

Three Arrows Capital, a hedge fund with bullish views on crypto, plunged into liquidation and filed for bankruptcy due to its exposure to TerraUSD.

Then came the November collapse of FTX, one of the world’s largest cryptocurrency exchanges, which was run by Sam Bankman-Fried, an executive often in the limelight. The fallout from FTX continues in the cryptocurrency industry.

On top of crypto-specific failures, investors have also had to contend with rising interest rates, which has put pressure on risk assets including stocks and crypto.

Since reaching its all-time high of around $69,000 in November 2021, bitcoin has plunged nearly 75% wiping off more than $2 trillion from the value of the entire cryptocurrency market. Bitcoin was trading below $17,000 on Friday.

CNBC reached out to the people behind some of the boldest price calls on bitcoin in 2022, asking them how they got it wrong and whether the year’s events have changed their outlook for the world’s largest digital currency.

Tim Draper: $250,000

In 2018, at a tech conference in Amsterdam, Tim Draper predicted bitcoin to reach $250,000 per coin by the end of 2022. The famous Silicon Valley investor wore a purple tie emblazoned with the bitcoin logo, and even did a rap About digital currency on the platform.

Four years later, it looks unlikely that Draper’s call will materialize. Asked earlier this month about his $250,000 target, the Draper Associates founder told CNBC $250,000 is “still my number” — but he’s extending his prediction to six months.

VC investor Tim Draper: Bitcoin is 'decentralised, open and transparent'

“I expect a flight of quality and decentralized cryptos like bitcoin, and some of the weaker coins to become remnants,” he told CNBC via email.

Bitcoin would need to rally roughly 17,000% from its current price of $1,400 for Draper’s prediction to come true. Their argument is that despite the liquidation of notable players in the market like FTX, there is still a vast untapped demographic for bitcoin: women.

“My belief is that since women control 80% of retail spending and 1 in 7 bitcoin wallets are currently held by women, the dam is about to break,” Draper said.

Nexo: $100,000

Guido Buehler: $75,000

On January 12, Guido Buehler, the former CEO of SEBA, a regulated Swiss bank that focuses on cryptocurrencies, said that his company had an “intrinsic valuation model” for bitcoin in 2022 of between $50,000 and $75,000.

Buhler’s reasoning was that institutional investors would help propel the price.

SEBA Bank CEO Says Institutional Investors Are Looking For The Right Time To Get Into Crypto

At the time, bitcoin was trading between $42,000 and $45,000. Bitcoin will never reach $50,000 in 2022.

The executive, who now runs his own advisory and investment firm, said 2022 has been “annus horribilis” in response to questions from CNBC about what went wrong with the call.

“The war in Ukraine in February shocked the world order and the paradigm of financial markets,” Buehler said, citing the consequences of market volatility and rising inflation in light of the disruption of commodities such as oil.

Another major factor was “the realization that interest rates are still the driver of most asset classes,” including crypto, which “was a hard blow to the crypto community, where the belief has been that this asset class does not correlate with traditional assets.” “

Buhler added that the lack of risk management, missing regulation and fraud in the crypto industry have also been major factors affecting prices.

The executive remains bullish on bitcoin, adding that it will reach $75,000 “sometime in the future” but that it is “a matter of time.”

“I believe that BTC has proven its strength during all the crises since 2008 and will continue to do so.”

Paolo Ardoino: $50,000

Paolo Ardoino, chief technology officer at Bitfinex and Tether, told CNBC in April that he expects bitcoin to drop sharply below $40,000 but “above $50,000” by the end of the year.

He said at the time, “I’m an enthusiast on bitcoin … I’m seeing a lot of this industry and there are so many countries interested in bitcoin adoption that I’m really positive.”

Bitfinex CTO expects bitcoin to be 'above $50,000' by the end of the year

On the day of the interview, bitcoin was trading above $41,000. The first part of Ardoino’s call was correct – bitcoin had fallen well below $40,000. But it never got better.

In a follow-up email this month, Ardoino said he believes in the resilience of bitcoin and the blockchain technology underlying it.

“As mentioned, making predictions is difficult. No one can predict or estimate the number of companies that are well regarded by the global community that have failed in such spectacular fashion, he told CNBC.

“Some legitimate concerns and questions remain around the future of crypto. It may be a volatile industry, but the technologies developed behind it are incredible.”

Deutsche Bank: $28,000

A major theme in 2022 has been bitcoin’s correlation to US stock indexes, particularly the tech-heavy Nasdaq 100. In June, analysts at Deutsche Bank published a note suggesting that bitcoin could end the year with a price of around $27,000. At the time of note, bitcoin was trading at over $20,000.

This was based on the belief of equity analysts at Deutsche Bank that the S&P 500 would jump to $4,750 by the end of the year.

But this call is unlikely to materialize.

How The $60 Billion Crypto Collapse Worried Regulators

Marion Labouré, one of the authors of Deutsche Bank’s preliminary report on crypto in June, said the bank now expects bitcoin to end the year at around $21,000.

“High inflation, monetary tightening and slowing economic growth have put additional pressure on the crypto ecosystem,” Labore told CNBC, adding that more traditional assets like bonds may look more attractive to investors than bitcoin.

Labor also said high-profile collapses continue to affect sentiment.

“Every time a major player in the crypto industry fails, the ecosystem suffers a crisis of confidence,” he said.

“Apart from lack of regulation, crypto’s biggest hurdles are transparency, conflicts of interest, liquidity and lack of reliable available data. The FTX collapse is a reminder that these problems remain unresolved.”

JP Morgan: $13,000

In a research note dated November 9, JPMorgan analyst Nikolaos Panigirtzoglu and his team predicted that the price of bitcoin would drop to $13,000 “in the coming weeks”. He had the advantage of halving following the FTX liquidity crisis, which he said would lead to “a new phase of crypto deleveraging” to put negative pressure on prices.

Analysts said the cost it charges miners to produce new bitcoin has historically served as a “floor” for bitcoin’s price and the lows of $13,000 seen in the summer months. Likely to go again. This isn’t as far off from Bitcoin’s current price as some of the other predictions, but it’s still less than Friday’s price of $17,000.

A JP Morgan spokeswoman said Panigirtzoglu was “unavailable to comment further” on her research team’s forecast.

Comprehensive Strategy Research: $13,000

Fed tightening could send bitcoin as low as $13,000, strategist warns

When asked about today’s call, Harnett said he is “very happy to suggest that we are still in the process of the bitcoin bubble deflating” and that a drop to near $13,000 is still in the cards.

“Bubbles typically see 80% reversals,” he said in response to emailed questions.

According to Harnett, an extended decline from $13,000 to $12,000 or even the next $10,000 cannot be ruled out, with the US Federal Reserve likely to hike interest rates further next year.

“Sadly, there is no intrinsic valuation model for this asset – in fact, there is no agreement whether it is a commodity or a currency – which means there is every chance that it could go lower if we see tight liquidity conditions and/or failure of other digital entities/exchanges,” he said.

Mark Mobius: $20,000 then $10,000

Carol Alexander: $10,000

In December 2021, a month after bitcoin hit its all-time high, Carol Alexander, professor of finance at the University of Sussex, said she expected bitcoin to drop to $10,000 “or even more” in 2022.

At the time, bitcoin fell nearly 30% from its record high of around $69,000. Nevertheless, at the time many crypto talking heads were predicting further gains. Sikandar was one of the rare voices to go against the tide.

How Wall Street Learned To Love Bitcoin

“If I were an investor now, I would be thinking of getting out of bitcoin sooner because its price will probably drop next year,” she said at the time. His bearish call rested on the idea that bitcoin has little intrinsic value and is mostly used for “speculation”.

Bitcoin didn’t drop as low as $10,000 – but Alexander is feeling good about his prediction. “Compared to others’ predictions, mine was the closest,” she said in emailed comments to CNBC.


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