Bitcoin forecast: it could go down again

Analysts at JPMorgan have come up with new predictions for the price of Bitcoin that it could fall another 25%. 

Bitcoin price predictions by JPMorgan analyst

This was reported by Forbes citing a note sent to clients, written by the team of analysts led by Nikolaos Panigirtzoglou. 

This note says that what is problematic about this new phase of deleveraging induced by the collapse of FTX and Alameda Research is the reduction in the number of crypto assets with strong balance sheets that can bail out those with little capital and high leverage. 

The hypothesis is that the price of Bitcoin could fall as low as $13,000. 

The drop could be triggered by margin calls and could lead to a wave of debt reduction in the crypto sector. This would be compounded by knock-on bankruptcies due to exposure to FTX. 

The note from Panigirtzoglou’s team reads: 

“Given the size and interlinkages of both FTX and Alameda Research with other entities of the crypto ecosystem including DeFi platforms it looks likely that a new cascade of margin calls, deleveraging and crypto company/platform failures is starting similar to what we saw last May/June following the collapse of Terra.”

Then again, Alameda’s liabilities amount to $8 billion, so they appear large enough to create a real wave of debt reduction similar to what was observed after the implosion of the Terra ecosystem. The note expects this debt reduction to last for at least a few weeks unless a bailout for Alameda Research and FTX is quickly agreed upon . 

The good thing, however, is that the impact on the crypto markets is expected to be smaller in magnitude than in May and June, because deleveraging was already underway by then. 

Finally, the note also states that the Alameda and FTX events will increase pressure from investors and regulators on crypto companies to disclose more information about their balance sheets and reserves. 

Comparison with the past

This prediction would be in line with what has happened during the previous two cycles. 

Bitcoin has a cycle of about four years related to the halving. The first halving occurred in 2012, and the following year a huge speculative bubble inflated and burst in 2014. 

During the bear market of 2014/2015, the lowest price touched by BTC was 85% lower than the previous all-time high touched during the 2013 bubble. 

In the next cycle, which began in 2016 with the second halving, a similar thing happened, with a large bubble in 2017, and the minimum price touched during the post-bubble bear market that was 85% lower than the 2017 high. 

Should something similar happen again in the current cycle, which began in 2020 with the third halving, the minimum price of the bear market following the 2021 speculative bubble should be around $11,500. 

Actually, according to JPMorgan analysts, the bottom this time could be at $13,000, but since the 2021 bubble was also proportionately significantly smaller than the previous two, a smaller loss could be justified. 

Other bearish predictions for Bitcoin’s price

In such a scenario, it is not surprising that there are also other bearish forecasts for the short term. 

For example, according to technical analyst Ali B., if Bitcoin’s price fails to break through the 38.2% Fibonacci retracement level set at $18,250 soon, it could fall below $15,965. 

This is not the $13,000 predicted by JPMorgan, but while the latter’s prediction concerns the trend in the coming weeks, that of Ali B., on the other hand, seems to be focused on the coming days. These two predictions therefore are actually compatible with each other. 

Ali B. points out that yesterday the price of BTC rose above the $16,000 support level trying to recover the $18,000 level. At the moment however, it is consolidating in a narrow range, such that any breakout of this range could trigger a strong move.

That range is precisely between $16,000 and $18,000. Should it manage to break above $18,100 it could then rise back up to $19,350, but while the anticipatory technical indicator MACD has entered the buy zone, the 50-day moving average and RSI are still negative. So the most likely scenario looks like a return below $16,000. 

Bitcoin long-term predictions

However, one should not confuse these short- or medium-term forecasts with the long-term ones. 

Indeed, the next halving is still more than 18 months away, and it is therefore possible that the bear market will last for a while longer. 

Moreover, it is by no means certain that once the bear market is over, a new bull run will be triggered immediately. 

If, as JPMorgan analysts argue, the current downturn lasts only a few weeks, the bear market of 2022 could even end before the close of the year. However, this by no means implies that there will be a new bull run in 2023. 

If anything, it is possible that the end of the bear market will be followed by a period of lateralization, so much so that even Elon Musk has predicted that the crypto winter will last much longer. 

In the spring of 2024 there will be the fourth halving of Bitcoin, and that is probably the most touted year for the next bull run. 

What is not possible to know at all is from what price level the next bull run will start, and at what top level it will stop. 

Thus in the short run, the obvious problems caused by the failure of FTX and Alameda remain. In the medium term, these problems could continue to have a negative impact on the price of Bitcoin, although sooner or later they will cease to do damage, as they did between May and June of this year. 

However, the situation may only really turn positive again over several months, but at that point, it will be crucial to understand from what minimum level the eventual upturn will begin. 

What if Bitcoin surprises everyone instead?

There is, however, a kind of anomaly that forces one to consider another hypothesis as well. 

The anomaly lies in the fact that right now almost everyone thinks that the price of Bitcoin may fall again. Instead, there is usually never this sort of common agreement about the future trend of the price of BTC, even in the short term. 

In the past, it has often happened that the actual trend of the price of BTC has been contrary and opposite to predictions, especially when these were aligned. 

The most glaring case occurred precisely in November last year, when the vast majority of predictions were still positive in the short term. 

For example, if everyone knew that the price of Bitcoin was set to fall further in the coming days, everyone could gain by shorting it. This is actually not realistically possible, because generally if someone gains in the financial markets it means someone else loses, especially in the short run. 

Such a scenario is almost impossible, as well as highly unlikely, and this might suggest that it will not happen. However, if that certainty were to break down a bit, with the onset of some bullish predictions in the short run, paradoxically it might become more likely. 

It is worth noting that the low peak touched on 9 November has not been touched again in the days since, and this may be enough to lead some to think that the worst is now over.