Wrong Bitcoin Projections; down 60%

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A year ago, crypto analysts, buoyed by the successes of 2021, had high hopes for bitcoin, with some seeing the token reach US$100,000 or more in the past year.

This is a far cry from where the coin ended this annus horribilis: US$16,500.

Bitcoin, weighed down by a hawkish US Federal Reserve, a series of scandals and implosions of once-vaunted crypto space projects, lost more than 60% last year, its second-worst annual performance on record and only its third year. of decline.

Photo: Reuters

Other cryptocurrencies also suffered, with ether losing around 70% and an index of the 100 largest coins losing around 65%.

People didn’t understand how big the easy money asset class cryptocurrencies were in 2020 and 2021, said Matt Maley, senior market strategist at Miller Tabak and Co.

Some cryptos will survive and even thrive in the future, but they went way too far, way too fast after the Fed embarked on its zero interest rate and massive quantitative easing policies. Now that those programs are gone, it will take much longer for the crypto asset class to reach its full potential, he said.

At the end of 2021, Fundstrat Global Advisors LLC Managing Partner Tom Lee said the coin could easily hit US$100,000 last year and the US$200,000 range was achievable.

I know that sounds fantastic, but it’s very helpful, Lee said.

In January last year, strategists at Goldman Sachs Group Inc predicted that bitcoin could hit US$100,000 within five years as it took market share from gold.

Crypto lawyer Mike Novogratz had called for the token to reach US$500,000 within the same time frame, a projection he later abandoned early last month.

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

However, perhaps no one was bolder than Ark Investment Management LLC Managing Director Cathie Wood, who in late November reiterated her bitcoin target of $1 million by 2030, an increase of approximately 6,000% from current levels.

Sometimes you have to go through crises to see the survivors, Wood told Bloomberg Television at the time. We think bitcoin comes out smelling like roses.

At the start of last year, many strategists misunderstood how aggressive the US central bank was going to be with its interest rate hikes as it tried to tame inflation.

Other central banks around the world have also hiked rates, creating an undesirable environment for risky assets such as crypto and a big change from the heady days of 2020 and 2021 when rates were low.

Crypto-centric stocks were also destroyed last year, with Coinbase Global Inc and Marathon Digital Holdings Inc each losing around 90%, Riot Blockchain Inc losing 85% and MicroStrategy Inc down 74%.

2020 to 2021 has been a zero-rate political party, rewarding the most suave participants for extreme risk-taking, Arcane Research senior analyst Vetle Lunde wrote in a 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 last year, blow after blow for the industry.

Lunde said his companies’ Liquid Tradeable BTC proxy fell to June 2020 lows and FX balances also fell, which had implications for bitcoin liquidity.

He expects the market to calm down this year, but does not 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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