According to a research report by Standard Chartered, bitcoin is projected to decline to $5,000 by 2023, adding to the potential market surprises next year.
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The price of bitcoin experienced a sudden and significant drop at the beginning of the week as investors awaited a major Federal Reserve policy decision and evaluated concerns surrounding Binance.
Bitcoin currently stands at $29,198.15, a decrease of over 3%, as reported by Coin Metrics. It hit a low of $28,995.02, the lowest level in over a month.
The cause behind this sharp decline remains uncertain, although the drop coincided with a Wall Street Journal report that intensified concerns among investors about Binance. CEO Changpeng “CZ” Zhao allegedly indicated in a private conversation in 2019 that Binance affiliates had influenced a portion of the trading volume during the launch of its U.S. trading arm. Questions have been raised about whether this activity constituted “wash trading” designed to artificially inflate volume.
Binance is the largest cryptocurrency exchange globally and is currently facing legal action from the Securities and Exchange Commission. It is also under investigation by the Department of Justice, which is likely to result in a consent decree or settlement, as previously reported by CNBC. The allegations against Binance include anti-money laundering violations and sanctions evasion, which could hinder its ability to obtain operating licenses.
Additionally, investors are closely monitoring the outcome of the Federal Reserve’s two-day meeting, set to conclude on Wednesday.
“Bitcoin has been trading within a narrow range for slightly over a week, and it is likely to continue until the conclusion of this week’s FOMC meeting,” said Yuya Hasegawa, a crypto market analyst at the Japanese bitcoin exchange Bitbank. “The market has mostly priced in another 25 basis point rate hike by the Federal Reserve this week and is paying close attention to whether there will be another hike by the end of the year, as indicated in FOMC’s previous economic outlook.”
The increase in interest rates throughout 2022 has contributed to the decline in bitcoin’s price, which has already faced several negative catalysts in the industry. Despite the recent resilience in bitcoin and the rally in equities, concerns of a recession persist as traders assess the delayed impact of rate hikes and recent indications of an economic slowdown.
“We have yet to see June’s personal consumption expenditure… and the decision to halt rate hikes is unlikely until there is more data and confidence that inflation is decreasing,” added Hasegawa. “This suggests that FOMC’s rate decisions will remain ‘live’ going forward, and it may take a while for bitcoin to successfully surpass $31,500.”
—Reporting contributed by CNBC’s Rohan Goswami.
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