Deutsche Bank Strategists Explain Why Crypto Freefall Will Continue
It has been a difficult couple of months for crypto investors as worries of a recession intensify. The price of Bitcoin plummeted from over $45,000 at the start of April to below $20,000 on June 30 – falling below $18,000 in the process.
In the meanwhile, experts at Deutsche Bank predict that cryptocurrencies will continue to suffer. The intricacy of the system, according to recent research by Marion Laboure and Galina Pozdnyakova of Deutsche Bank, may lead the crypto markets to continue to bleed.
The duo emphasised the disintegration of the Terra ecosystem and the well-reported Celsius crisis, stating that stabilising token values would be difficult since there are no “standard valuation methodologies like in the public equities system.” In addition, the survey noted that the bitcoin sector is severely fragmented.
The strategists also noticed that speculative deals would include the simultaneous usage of many coins, which increases spillover effects. Current market liquidity may rapidly evaporate, weakening investor confidence and increasing the likelihood of contagion in the process.
The negative global macroeconomic circumstances are also a major issue for investors. According to Deutsche Bank, quantitative tightening procedures conducted by central banks have a significant impact on risk assets such as cryptocurrency. The potential of a U.S. recession next year exacerbates these macro-level dangers.
Michael Burry, made famous by the film The Big Short, shares Deutsche Bank’s negative perspective. The hedge fund manager feels that the massive crypto and stock market drop has reached its midway.
Bitcoin Could Return To $28K By December
The bank’s experts anticipate that the crypto market will continue to collapse, but it’s not all bad news. Since late last year, the cryptocurrency market has moved in line with the S&P 500 and Nasdaq.
A rising tide raises all ships. The bank believes that the S&P will rebound to January levels and that the strong linkages between the benchmark cryptocurrency and conventional markets might lead to a 31 percent price increase from current levels. By the end of the year, bitcoin would be comfortably back over the $28,000 zone, but still a long cry from where it was in November 2021.