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Bitcoin Value Could Increase by 70% if US Defaults on Debt
By
Will Ellis
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Last Updated on May 6, 2023
One Standard Chartered analyst predicts a roughly 70% increase in Bitcoin prices in the event of a US debt default.
Standard Chartered’s Geoff Kendrick predicted a $20,000 (£16,000) increase in Bitcoin’s value in the event of a US default. Some cryptocurrencies might behave more like stocks and bonds than others.
Therefore, a long position in bitcoin and a short position in ethereum might be the best strategy. Both bond and stock markets have been nervous as the upcoming debt limit problem shows no indications of being resolved. While a historic default has some investors worried, Bitcoin is one asset that might actually benefit from it.
Will Bitcoin’s Value Raise by £16k ($20,000)
The head of FX analysis at Standard Chartered, Geoff Kendrick, has predicted that the bitcoin price might soar by as much as $20,000, or 68%, if the United States were to default.
He said to one paper, the Insider, that this is due to the fact that the largest cryptocurrency by market size is often regarded as a safe haven during times of uncertainty.
However, Kendrick does not believe bitcoin would have a linear rally if the US defaulted, predicting that it would likely emerge somewhat lower on the first few days or at least within a week. He predicted that if it happened, the price of bitcoin would fall by $5,000 before rising by $25,000.
Even if other cryptocurrencies behaved like bitcoin, he said, others, like ethereum, would trade more like stocks and hence fail.
Therefore, a long position in bitcoin and a short position in ethereum might be the best strategy. This could be expressed well through a combination of those elements.
All Eyes on the US
The world’s financial markets might see “seismic ruptures” this summer if Congress does not increase the $31.4 trillion federal debt ceiling. Janet Yellen, the US Treasury Secretary, said on Tuesday that a default would be disastrous for the economy, leading to widespread joblessness, higher rates in perpetuity, and payment failures.
Three-month Treasury yields recently reached a high of 22 years with maturity around a possible default date, with the White House and House Republicans still miles away from a compromise to increase the debt limit.
Coincident with the Federal Reserve’s strict vice-like grip cycle in 2022, bitcoin saw a big sell-off that it is currently recovering from.
The problems at First Republic Bank have rekindled anxieties in the banking industry (Protect Your Online Privacy), yet bitcoin has risen about 80% so far in 2023 and is now close to $30,000.
Conclusion
Although he did not mention the possibility of a US default, Kendrick has already gone bullish on bitcoin, predicting in a note published Monday that the price could rise to $100k (£80k) by 2024’s close due to bank distress, the bitcoin halving, plus an anticipated close to Fed rate hikes.
While there is still some haze over the path to the USD 100,000 mark, we feel more confident in making that prediction now than we did before.
