Analysts at the equity trading desk of investment bank Stifel believe bitcoin could fall as low as $12,000 in the coming months.
As MarketWatch's Financial Markets Roundup article puts it:
"Other casualties Bannister and Carroll expect are Bitcoin BTCUSD... sensitive to weakening global liquidity and a stronger dollar. Stifel's strategists see Bitcoin falling from around $34,000 to $12,000 if global M2 - a measure of money supply - falls to low single digits year-on-year than they expect."
With the end of the global pandemic, the M2 money supply - or the total amount of "near money" - i.e. cash, checking deposits, savings deposits, mutual funds and all less liquid assets is expected to fall again. From February to August, during the pandemic, the M2 supply in the US rose by almost $3 trillion.
The large increase reflected the tough economic times for citizens and the actions of the Federal Reserve. The lowered interest rates to reduce the impact on individuals. Now that the pandemic is almost over, interest rates will rise again - and people might start spending their money on something other than cryptocurrencies again.
The BTC price could see a significant drop, Stifel analysts predict, as people will have less extra cash on hand that could be used to invest in cryptocurrencies.
Will the BTC price continue to rise?
Although Stifel analysts predict a downward trend in the coming weeks, the market does not seem to agree. Currently, the BTC price is around $35k, well above the low of $28k from earlier this month. Even though Bitcoin is somewhat following the M2 yearly trend, this move could be short-lived. Just because there will be less cash when the pandemic ends doesn't mean new or existing investors will suddenly shy away from BTC and crypto.
Because in fact, the more traditional analysts talk about crypto, the more new investors will see the technology as viable. With the acceptance of both crypto and blockchain technology, investors will continue to see movements outside of normal trends - due to events that these markets have never seen before (such as a global pandemic).
But will the market hold?
Crypto markets will continue to hold as innovative, new technology and large companies come into play. Plus, the cryptocurrency market will always see movement as market analysts like Bannister and Carroll of Stifel talk about price. The very fact that companies like these are closely watching the price of BTC - that tells investors that blockchain technology is a force to be reckoned with.