Bitcoin at US$200,000 flop projections as coin ends year down 60%

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(December 31): A year ago, crypto analysts, building on the successes of 2021, had high hopes for bitcoin, with some seeing the token reach $100,000 (RM440,500) or more in 2022 .

That’s a far cry from where the coin actually ends this annus horribilis: US$16,500.

Bitcoin, weighed down by an ultra-hawkish US Federal Reserve (Fed) and a series of scandals and implosions of once-vaunted crypto-space projects, lost more than 60% in 2022, its second-worst annual performance on record, and only his third year younger. Other cryptocurrencies also suffered, with Ether losing almost 70% and an index of the 100 largest coins losing around 65%.

People didn’t understand how big easy money asset class cryptocurrencies were in 2020 and 2021, said Matt Maley, chief market strategist for Miller Tabak + Co. Some cryptos will survive and even thrive going forward, but they went too far, far too soon after the Fed embarked on its zero interest rate and massive quantitative easing policies. Now that these programs are gone, it will take much longer for the crypto asset class to reach its full potential.

At the end of 2021, Fundstrats Tom Lee said that the coin could easily hit US$100,000 in 2022 and the US$200,000 range was achievable. I know that sounds fantastic, but it’s very helpful, he told an interviewer.

Meanwhile, in early January, Goldman Sachs strategists predicted that bitcoin could reach US$100,000 over five years by taking market share from gold. Crypto lawyer Mike Novogratz had called for the token to reach US$500,000 in the same time frame, a projection he later abandoned in early December.

Price predictions over US$100,000 showed how recency bias still sway most of us, said Noelle Acheson, author of the Crypto Is Macro Now newsletter.

But perhaps none were bolder than ARK Investment Managements Cathie Wood, which at the end of November reiterated its bitcoin target of US$1 million by 2030, an increase of approximately 6,000% from current levels.

Sometimes you have to go through crises to see the survivors, explained Woodtold Bloomberg TV at the time. We think bitcoin comes out smelling like roses.

Many strategists at the start of the year misunderstood how aggressive the Fed was going to be with its interest rate hikes as it struggled to rein in inflation. Other central banks around the world have also hiked rates, creating an undesirable environment for risky assets like crypto and a big change from the heady days of 2020 and 2021 when rates were rock bottom.

Crypto-centric stocks were also destroyed in 2022, with Coinbase Global Inc and Marathon Digital Holdings Inceach losing around 90%, Riot Blockchain Inclosing 85% and MicroStrategy Incoff losing 74%.

2020-21 was a zero-rate political party, rewarding the most suave participants for extreme risk-taking, Vetle Lunde, principal analyst at Arcane, wrote in a research report. On the other hand, 2022 has been a year-long hangover, he said, adding that fortune has not favored the brave and we have entered a constant catastrophic cycle of default, fraud and contagion.

From the implosion of the Terra blockchain, which brought down a number of crypto lenders, to the bankruptcy of FTX, the year has been one after another for the industry. Lunde points out that his companies’ Liquid Tradeable BTC proxy fell to June 2020 lows and that FX balances also fell, which has implications for bitcoin liquidity. He expects the market to calm down in 2023, but doesn’t see prices hitting any old all-time highs over the period, although bitcoin may end the year higher than it started.

In 2022, naked swimmers were exposed and bad apples were eliminated, he said. Over the past year, we have relearned an old bitcoin slogan trust no one.

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