How the market got it wrong

The crypto market has been rough this year, with more than $2 trillion wiped off its value since its peak in November 2021. Cryptocurrencies have been under pressure following the collapse of major exchange FTX.

Jonathan Raa | Nurphoto | Getty Images

2022 marked the start of a new “crypto winter”[ads1];, with high-profile companies collapsing across the board and digital currency prices crashing spectacularly. The year’s events caught many investors by surprise and made the task of predicting bitcoin’s price that much more difficult.

The crypto market was awash with pundits making frantic calls about where bitcoin was headed next. They were often bullish, although a few correctly predicted the cryptocurrency to drop below $20,000 per coin.

But many market watchers were caught off guard in what has been a turbulent year for crypto, with high-profile corporate and project failures sending shockwaves through the industry.

It began in May with the collapse of terraUSD, or UST, an algorithmically stable coin that was meant 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 bullish crypto hedge fund, went 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 run by Sam Bankman-Fried, an executive often in the spotlight. The fallout from FTX continues to ripple across the cryptocurrency industry.

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

Bitcoin has fallen around 75% since reaching its all-time high of nearly $69,000 in November 2021, and more than $2 trillion has been wiped off the value of the entire cryptocurrency market. On Friday, bitcoin traded for just under $17,000.

CNBC reached out to the people behind some of the boldest bitcoin price calls 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 technology conference in Amsterdam, Tim Draper predicted that bitcoin would reach $250,000 per coin by the end of 2022. The famous Silicon Valley investor wore a purple tie with bitcoin logos, and even performed a rap about the digital currency on stage.

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

How the market got it wrong

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

Bitcoin would need to rise nearly 1,400% from its current price of just under $17,000 for Draper’s prediction to come true. His reasoning is that despite the demise of notable players in the market like FTX, there is still a huge untapped demographic for bitcoin: women.

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

Nexus: $100,000

Guido Buehler: $75,000

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

Buehler’s rationale was that institutional investors would help drive the price higher.

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

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

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

Another important factor was “the recognition that interest rates are still the driver of most asset classes,” including crypto, which “was a severe blow to the crypto community, where there has been the belief that this asset class is not correlated with traditional assets.”

Buehler said a lack of risk management in the crypto industry, lack of regulation and fraud have also been important factors affecting prices.

However, the executive is bullish on bitcoin, saying it will hit $75,000 “sometime in the future” but that it’s “all a matter of timing.”

“I believe that BTC has proven its resilience throughout the crisis since 2008 and will continue to do so.”

Paolo Ardoino: $50,000

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

“I am a bullish person on bitcoin … I see so much happening in this industry and so many countries interested in bitcoin adoption that I am very positive,” he said at the time.

Bitfinex CTO expects that bitcoin will be

On the day of the interview, bitcoin was trading above $41,000. The first part of Ardoino’s talk was correct – bitcoin fell well below $40,000. But it never recovered.

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

“As mentioned, predictions are difficult to make. No one could have anticipated or anticipated the number of companies, well-regarded by the global community, failing in such spectacular fashion,” he told CNBC.

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

Deutsche Bank: $28,000

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

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

But that call is unlikely to be realized.

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

“High inflation, monetary tightening and slow economic growth have likely put further downward pressure on the crypto ecosystem,” Laboure told CNBC, adding that more traditional assets such as bonds may start to look more attractive to investors than bitcoin.

Laboure also said high-profile collapses continue to hit sentiment.

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

“In addition to the lack of regulation, crypto’s biggest obstacles are transparency, conflicts of interest, liquidity and lack of reliable available data. The FTX collapse is a reminder that these issues continue to be unresolved.”

JPMorgan: $13,000

In a Nov. 9 research note, JPMorgan analyst Nikolaos Panigirtzoglou and his team predicted that the price of bitcoin would fall to $13,000 “in the coming weeks.” They had the benefit of hindsight after the FTX liquidity crisis, which they said would lead to a “new phase of crypto debasement”, putting downward pressure on prices.

The cost it takes miners to produce new bitcoins historically acts as a “floor” for bitcoin’s price and is likely to return to a low of $13,000 seen over the summer months, the analysts said. That’s not as far off bitcoin’s current price as some other predictions, but it’s still much lower than Friday’s price of just under $17,000.

A JPMorgan spokesperson said Panigirtzoglou was “not available to comment further” on the research team’s forecast.

Absolute Strategy Research: $13,000

Bitcoin Could Fall As Low As $13,000 As Fed Tightens, Strategist Warns

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

“Bubbles typically see an 80% reversal,” he said in response to questions by email.

With the US Federal Reserve likely set to raise interest rates further next year, an extended drop below $13,000 to $12,000 or even $10,000 next cannot be ruled out, according to Harnett.

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

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

Carol Alexander: $10,000

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

Bitcoin at the time had fallen around 30% from its record high of nearly $69,000. Still, many crypto talking heads at the time predicted further gains. Alexander was one of the rare voices that went against the grain.

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“If I were an investor now, I would think about getting out of bitcoin soon because the price will probably crash next year,” she said at the time. Her bearish talk rests on the idea that bitcoin has little intrinsic value and is mostly used for “speculation.”

Bitcoin didn’t quite fall as low as $10,000 — but Alexander feels good about her prediction. “Compared to other people’s predictions, mine was by far the closest,” she said in emailed comments to CNBC.

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