(Kitco News) Markets are underpricing several "surprise" scenarios for next year, according to Standard Chartered. The list includes Bitcoin dropping to $5,000 and gold rallying to a new record high of $2,250 an ounce.
Bitcoin could see significant losses next year as the technology sector continues to suffer and the crypto space sees more bankruptcies and contagion risks, Standard Chartered said in a note titled "The financial-market surprises of 2023."
A selloff to $5,000 would mean Bitcoin falling 70% from current levels of around $17,000. Bitcoin is already down 63% year-to-date following several massive down waves triggered by collapses of various crypto projects and companies, including the latest round of volatility due to the FTX implosion. Just over a year ago, Bitcoin traded at a record high of $69,000.
"Yields plunge along with technology shares, and while the Bitcoin sell-off decelerates, the damage has been done. More and more crypto firms and exchanges find themselves with insufficient liquidity, leading to further bankruptcies and a collapse in investor confidence in digital assets," Standard Chartered Bank's global head of research Eric Robertsen said in the note published Sunday.
Another scenario is gold rallying as Bitcoin falls, with investors switching focus from the digital version of gold to the real metal. Robertsen said gold could jump to $2,250 an ounce next year "as cryptocurrencies fall further and more crypto firms succumb to liquidity squeezes and investor withdrawals."
This would be a 26% advance from the current levels. February Comex gold futures were last trading at $1,790.70, down 1.04% on the day.
Increased volatility in the marketplace next year could also help gold secure its position as a safe-haven asset amid increased market volatility in 2023, Robertsen added. "The 2023 resurgence in gold comes as equities resume their bear market and the correlation between equity and bond prices shifts back to negative," he wrote.
In the note, Robertsen identified a number of potentially extreme "surprise" scenarios that "are under-priced by the markets." He also clarified that these scenarios "fall materially outside of the market consensus or our own baseline views."