Despite the price recovery since the beginning of the year, the uncertainty on the crypto market is enormous. The regulatory frenzy in the US and the liquidation of crypto-savvy banks like Silvergate, Silicon Valley Bank and Signature are frightening investors. But even detached from the temporarily bad news, many investors may ask themselves which scenarios would have to occur for the Bitcoin price to reach a certain level. Of course, it is completely impossible to predict this, but theoretical scenarios can help to better understand the impact of certain factors.
For this reason, three exemplary scenarios are listed below that could lead to a certain Bitcoin price at the end of the year. Technical chart factors are left out. Instead, the scenario description focuses on the macro situation, monetary policy, regulation and industry-specific factors.
Bitcoin Price at $10,000: The Worst Case Scenario
Inflation in the western industrial nations simply does not want to go down. At the same time, the rising cost of living is putting a strain on private households. As a result, they continue to reduce their savings rate and sell liquid assets like cryptocurrencies. The US Federal Reserve and the European Central Bank are shocking the markets with interest rate hikes that are not only well above expectations, but will also last throughout 2023 with no prospect of easing.
Added to this is the never-ending frenzy of regulation in the USA. The US Securities and Exchange Commission prevails in its narrative that most cryptocurrencies need to be regulated like securities. At the same time, most American crypto companies can no longer find a bank willing to establish a customer relationship with them. Other crypto services such as staking on well-known exchanges will be closed.
Bankruptcies and scandals in the crypto sector follow and destroy the already tarnished confidence in the crypto sector. As if this wasn’t bad enough, new demands are emerging from the EU aimed at a proof-of-work ban. It is intended to prohibit or make it more difficult for European companies to offer services with “climate-unfriendly” cryptocurrencies.
Bitcoin Price at $30,000: The Baseline Scenario
Inflation in the western industrialized nations is falling only slowly. There will be no further increases in energy costs or supply chain bottlenecks that will burden the economic situation of private households. The labor market situation remains stable. Nevertheless, there is a small technical recession in the USA and Europe. The major central banks carry out their last moderate increase in key interest rates (to a final 5.75 percent in the USA and 4.5 percent in the euro zone) in autumn and are signaling that there will be no further increases for the time being.
US regulatory frenzy calms down over the summer and agreement is reached on higher regulatory requirements for the crypto sector. The companies are given a sufficient period of time for the gradual implementation of the increased requirements. There are no further scandals or major insolvencies in the crypto sector. The uncertainty among private and institutional investors remains, but there are no more outflows of funds from the crypto sector.
Bitcoin Price at $60,000: The Best Case Scenario
Inflation has been falling sharply since April, while economic indicators such as labor market data have weakened. The strong US dollar is leading to ever greater concerns about loan defaults abroad. Meanwhile, American real estate prices are falling dangerously fast. Since the liquidation of Silicon Valley Bank, Silvergate and Signature and other rather small institutions, the Fed no longer dares to charge companies and private households with even higher interest rates.
The US Federal Reserve was already signaling at the end of April that it was therefore refraining from further interest rate hikes for the time being. There are plans to ease the restrictions in May. In June, inflation only reached a level of 2.4 percent. Fed Chair Jerome Powell has therefore announced the first interest rate cuts for July, which the market had already priced in at the end of April. Western workers, meanwhile, are enjoying the biggest pay rises in a long time, supported by newly announced tax breaks and economic stimulus programs for sustainable investment and consumption. The rising share prices lead to an increased appetite for risk and speculation among investors.
The US authorities were already rowing back from their tough anti-crypto course at the end of March. Common standards and regulations are to be drawn up in a dialogue with the industry. At the end of April, Amazon launches its NFT marketplace, which triggers a new NFT hype. Meanwhile, Tesla has continued to increase its bitcoin holdings and Meta has also become a bitcoin hodler. Blackrock and Bank of America announced in the summer that they would also like to offer crypto products to retail investors in the near future. One of the reasons for this was the turnaround in the case of the crypto asset manager Grayscale. His application for a Bitcoin Spot ETF was surprisingly granted in the summer.
However, new impetus is also coming from Asia. China is letting its citizens trade cryptocurrencies again via Hong Kong and is holding back with restrictive statements. In addition, other rumors are making the rounds that two larger sovereign wealth funds are planning to invest a small part in cryptocurrencies in the future.