Standard Chartered Bank has expressed concerns about the possibility of more price erosion in light of Bitcoin’s recent decline below the $60,000 threshold.
According to international financial institutions, the largest cryptocurrency in the world may increase its losses and soon hit the $50,000–$52,000 area.
The head of Standard Chartered Bank’s research on digital assets and FX, Geoffrey Kendrick, ascribed the possible negative outcomes to a confluence of macroeconomic trends and crypto-specific elements.
The future of Bitcoin still needs to be determined as investors struggle with increased market volatility and changing economic conditions.
Crypto-Specific Concerns
One critical crypto-specific factor Kendrick cited is the recent outflows from U.S. spot Bitcoin exchange-traded funds (ETFs). Over the past five consecutive days, these ETFs have witnessed net outflows, suggesting a potential shift in investor sentiment.
Exacerbating the situation is that the average purchase price for Bitcoin holdings within these ETFs currently stands below $58,000.
Kendrick alerts us to a higher danger of liquidation with over half of the spot ETF positions underwater, which might intensify selling pressure on the cryptocurrency.
The recent introduction of spot Bitcoin and Ether ETFs in Hong Kong still needs to produce a substantial amount of volume, which has put downward pressure on the price of Bitcoin.
Macroeconomic Headwinds
Beyond the crypto-specific concerns, Kendrick highlighted broader macroeconomic trends’ impact on Bitcoin’s price dynamics.
Since mid-April, liquidity metrics have drastically declined, especially in the US. This development could have a negative impact on assets like cryptocurrencies, which frequently benefit from plenty of liquidity.
Furthermore, the difficulties facing Bitcoin and other digital assets have been worsened by solid U.S. inflation data and dwindling chances of a Federal Reserve rate reduction.
The bitcoin market may continue to be affected by risk-off sentiment as investors struggle with tightening monetary policies and increased economic uncertainty.
A Buying Opportunity?
Despite the gloomy short-term outlook, Kendrick maintains Standard Chartered’s bullish long-term predictions for bitcoin. In March, the bank raised its 2024-end Bitcoin price target to $150,000, up from its previous estimate of $100,000.
Furthermore, Kendrick believes that Bitcoin’s price could even reach $250,000 at some point in 2025, contingent on strong inflows into spot Bitcoin ETFs and potential buying from forex reserve managers.
Kendrick suggests that investors may find an attractive entry point for Bitcoin in the $50,000-$52,000 range or if the upcoming U.S. Consumer Price Index (CPI) data released on May 15th paints a more favorable picture for the cryptocurrency market.
Conclusion
The warning from Standard Chartered draws attention to the volatility and unpredictability of the Bitcoin market, particularly in the near run. As it navigates several issues, Bitcoin’s near future seems filled with hazards.
Despite this, the bank has faith in Bitcoin’s ability to expand and gain traction, as evidenced by its bullish long-term outlook. Investors need to be cautious when navigating these swings as the market ages to take advantage of possibilities in this changing asset class.
