How a deeper crypto crash in 2023 could spark a gold rush
December is the time of year when City experts are on the look out for potential surprises in the year ahead. While their festive-season warnings are not full forecasts, they often contain some of the most tantalising prospects for market watchers.
This year, Standard Chartered says it’s possible that one of the most traditional stores of wealth could be well-placed to benefit from the storm over one of the newest global asset classes. Gold could be about to take off in 2023 should the collapse in crypto assets, including Bitcoin, continue.
The eye-catching prediction comes after a torrid time for cyrpto investors and exchanges, which are still being hit by shockwaves from the spectacular collapse of fallen industry darling FTX.
In the bank’s annual look-ahead to unlikely but not impossible so-called “black swan events,” Eric Robertsen, its global head of research and chief strategist, draws up the following senario:
“Gold makes a staggering recovery in 2023, rallying 30% to over $ 2,250/oz as cryptocurrencies fall further and more crypto firms succumb to liquidity squeezes and investor withdrawals.
“More and more crypto firms and exchanges find themselves with insufficient liquidity, leading to further bankruptcies and a collapse in investor confidence in digital assets. Gold sees a surge in demand from retail and institutional investors, as well as sovereign nations looking to shore up their reserves.”
One thing is for certain -- it has been a dramatic year for Bitcoin. Here’s a look at the price action in the most widely followed crypto coin out there, in a year when digital currency exchanges have collapsed, reputations have been won and lost and fortunes have vanished at the fastest pace seen on world markets.
Crypto investors and crypto exchange operators are still licking their wounds from the fallout from the FTX collapse.
The price of Bitcoin has sunk almost 25% over the past month, while crypto lender Genesis has warned it may be on the brink of insolvency. At least a dozen crypto firms have gone bust or suspended customer withdrawals since the start of the year, sparking concerns that the whole industry’s future could be in jeopardy, poised to suffer the same fate of investment bank Lehman Brothers at the start of the 2008 financial crash.
A number of crypto exchanges, like Seychelles-based OKX have been desperate to prove they are not the same as FTX, and have promised to back customer deposits with like-for-like reserves and calling in third-party audits in a desperate bid to preserve the industry’s crumbling credibility. Financial regulators across the world are scrambling to prove their increased focus on the crypto industry, with a barrage of new regulations being strung together to put a leash on the whole sector.
But some of FTX’s rivals appear to have been given a small boost from the whole saga, as FTX’s old customers rushed to withdraw their funds and deposit them with more transparent crypto exchanges with a less shady reputation. They are adamant that the collapse of a shoddy crypto firm is only good news for the longevity of a reputable one.
“It’s possible that the full ramifications have yet to be felt,” said Tom Duff Gordon, Vice President International Policy at Coinbase, who said the firm had benefitted from increased activity in recent days as a result of a “flight to quality,” adding that it had a “de minimis” exposure to FTX.
“We’ve seen a bad actor and alleged fraud and that is not something that’s unique to crypto.
“There will be a short term reduction in confidence for the sector [but] if this has the effect of removing some bad actors from the market... then I actually think we can come out of this stronger.”
