The global head of asset allocation at Invesco compares Bitcoin’s massive surge in 2021 to a financial mania and warns that BTC could fall as low as $30,000 by October.
An investment strategist at Invesco warned that Bitcoin’s price could drop below $30,000 this year if the cryptocurrency bubble bursts and follows the path of other historical market collapses.
Paul Jackson, global head of asset allocation at the investment firm, said there is a chance this could happen as the “mania” that drove Bitcoin to a $69,000 peak in November is easing.
In his forecast of “improbable but possible outcomes for 2022,” Jackson argues that BTC could eventually fall about 45% from its peak. Because bubble bursts tend to play out over a period of time, he says it is quite plausible that by around October the flagship cryptocurrency could be trading below $30,000.
“The mass marketing around Bitcoin resembles the activity of stockbrokers before the 1929 crash,” the Invesco strategist said.
The reference to 1929 points to the Wall Street crash that began with Black Thursday on October 24, followed by Black Tuesday the next week, when a massive sell-off wiped billions from the market.
“We know how that ended, and Bitcoin has already fallen to roughly $42,000 (as of January 7, 2022), closely following the downward path of our mania pattern,” he added.
Jackson said that following the typical bubble-burst pattern, an asset often declines about 45% over the 12 months after its peak. He called this a “typical financial mania.”
Under that scenario, he estimates Bitcoin’s price could reach lows of $34,000–$37,000 by the end of October. He believes that, following historical bubble patterns, BTC could continue to slide and potentially fall below the $30,000 mark if the mania persists over the next two years.
“So, in our view, it’s not hard to imagine Bitcoin falling below $30,000 this year,” the Invesco strategist said.
However, Jackson noted his forecast could be wrong, just as a prior prediction that Bitcoin would fall below $10,000 last year proved incorrect. He added that the cryptocurrency still has a “reasonable chance” of repeating last year’s growth cycle.
Earlier last week Bitcoin briefly dipped below $40,000 before recovering and attempting to overcome the $44,000 level. Still, its price continues to track broader market sentiment.
Analysts have pointed out that Bitcoin is trading in parallel with equities, meaning declines in traditional assets are reflected in the cryptocurrency and vice versa. Since late last year, one of the macro factors pressuring stocks has been expectations that the Federal Reserve will raise interest rates in the first quarter—anticipated to occur in early March.
At the time of writing, Bitcoin was trading around $41,685, down nearly 3% over the previous 24 hours.