- The Invesco Global Chief believes that Bitcoin can follow a similar template to the 1929 stock market crash.
- Bitcoin has already corrected by more than 30 percent from its all-time high levels in November 2021.
Bitcoin has once again become the center of discussion as the world’s largest cryptocurrency continues to trade in the $41,000-$44,000 range. Invesco’s Global Head of Asset Allocation Paul Jackson believes that the Bitcoin bubble could burst and that BTC could lose half of its value in 2022 as the investor mania wears off.
Jackson’s comments came through his list of ten “improbable but possible outcomes for 2022”. The Invesco chief also said that he sees the BTC price dropping under $30,000 levels in 2022. This will be more than 50 percent price corrections from the all-time high levels. In the past as well, BTC has demonstrated such correction and thus one cannot entirely rule out this possibility.
Citing the stock market crash of 1929, Jackson said that the boom in Bitcoin’s value has clear hallmarks of the phenomenon dubbed “financial mania”. He further wrote:
The mass marketing of Bitcoin reminds us of the activity of stockbrokers in the run-up to the 1929 crash. We know how that ended and Bitcoin has already fallen to around $USD 42,000 (as of 7 January 2022), following closely the downward path of our mania template. That template suggests a loss of 45 per cent is experienced in the 12 months after the peak of a typical financial mania.
What if Bitcoin follows the mania template?
If Bitcoin were to replicate this template of the 1929 stock market crash, Bitcoin could fall the way to $34,000 by end of October 2022, said Jackson. Further speculating, Jackson added:
The template also suggests that bubbles typically deflate for a further two years. Hence, we think it is not too much of a stretch to imagine Bitcoin falling below $USD 30,000 this year (with the health warning that we have got this wrong before and that it seems to be going through a series of bubbles).
In the past, Bitcoin has shown similar behavior. The BTC price topped in December 2017 and in the following month of January 2018 it had entered severe correction losing more than half its value. Later, Bitcoin continued to remain volatile for a long two-year period and crashed under $4K before resuming the mega rally in 2020.
Jackson is not the only one to expect bitcoin to correct further. Many other market analysts believe the same. In a recent JPMorgan report, nearly 20 analysts also believe that BTC will go under $30,000. However, a majority of them believe that Bitcoin could be heading to $60,000 by the year-end.
But we are sure of some exciting action ahead. More countries might adopt Bitcoin as a legal tender, with more regulatory clarity, and thus more institutional participation.