Is winter coming for the crypto world? A bull and bear case

The climate is colder across crypto markets, but what do experts expect in the future?

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Key points

  • The crypto world is now A$1.76 trillion lighter following a rough run for the alternative asset class
  • Another crypto winter could be ahead with one expert predicting Bitcoin below A$10,000
  • ARK Invest is still optimistic on Bitcoin, suggesting more upside from here

It is beginning to feel uncomfortably cold in the cryptocurrency markets lately. In the space of two and a half months, approximately A$1.76 trillion of market capitalisation has been wiped from the global crypto market.

Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) have been leading these losses in dollar terms. In the last week alone, the top two cryptocurrencies have fallen 14.5% and 22.7% respectively.

After experiencing such a tremendous pullback in prices, some spectators are calling this the beginning of the next crypto winter. For the uninitiated, this is an extended period of time where the alternative asset class underperforms.

The last ‘crypto winter’ occurred after enthusiasm died off in early 2018. During this near three-year timeframe, Bitcoin traded below its previous high of ~A$25,700 set in 2017. Investors had to patiently wait until December 2020 to reclaim this milestone.

But what stance do experts currently hold on the future of Bitcoin?

Is it about to get colder for crypto?

For crypto investors, the short-term headwind resides in the monetary policy instated by the Federal Reserve. While the loose money printing of the past acted as a catalyst for the price of Bitcoin, the Fed’s signalling for tighter policy in the near term is having the opposite effect.

The likelihood of an increase to interest rates by the Federal Reserve was only further bolstered by the chair’s comments overnight. Jerome Powell suggested a rate rise in March was a strong possibility, especially following the surprising rebound in the jobs market.

For this reason, CEO and founder of Bull and Bear Profits, Jon Wolfenbarger is expecting further pain to come for crypto markets and the price of Bitcoin. The analyst is forecasting an 80% fall from the recent Bitcoin high, placing the cryptocurrency under A$10,000.

What about the bull case for Bitcoin?

While the sentiment is frosty for crypto at present, the team at ARK Invest remains bullish. In their Big Ideas Summit 2022, the innovation-focused fund manager assigned Bitcoin with a market cap projection for 2030.

According to the presentation, ARK analysts believe Bitcoin’s market cap could reach US$28.5 trillion by 2030. This would represent a more than 25-fold increase in the cryptocurrency’s current valuation.

To get to this estimate, the dominant cryptocurrency was allotted value based on eight different use cases. These various use cases are as follows:

  • Remittance network
  • Emerging market currency
  • Economic settlement network
  • Nation-state treasury
  • Seizure-resistant asset
  • Institutional investment
  • Corporate treasury
  • Digital gold

When combined, the total value per Bitcoin by 2030 — as ARK Invest sees it — could be US$1.36 million. This would make the crypto three times larger in value than the entirety of the gold market at present.

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Motley Fool contributor Mitchell Lawler owns Bitcoin and Ethereum. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Bitcoin and Ethereum. The Motley Fool Australia owns and has recommended Bitcoin and Ethereum. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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