Dan Morehead, a fund manager at Pantera Capital, was asked about his bitcoin price forecast. In a conversation with Brian Chung of Yahoo Finance, Morehead is as bullish as ever.
Bitcoin price in 2022
Chung began the interview by asking the CEO of Pantera Capital what he thinks about the price of bitcoin so far in 2022.
“Bitcoin has had some pretty wild cycles in the last nine years that I have invested in it. It has had six bear markets averaging about 60 percent down. This has been 50 percent. And I think if institutions tend to get very involved in crypto, all of those cycles will hopefully subside, so I think a 50% bear market is probably all you’re going to get going forward.”
The lowest point is almost reached
Regarding the current situation, he believes that we are very close to the bottom.
“I think we are at the bottom or very close to it. And another thing that we’ve seen historically is that when there’s been a big rally, like in 2013-2017, in the last two years, the market typically peaks around January 1st and veers a little bit towards tax day. … and after that, let the market get going again.”
Correlation with the stock market
Morehead also looks at the performance of more traditional markets.
“The third thing that definitely hits is that while Bitcoin and cryptocurrencies generally have a very low correlation to asset classes over long periods of time, in very stressful periods, where the S&P is a proxy for risk, it has dropped quite a bit. There have been six of these periods since Bitcoin came into existence, and the average is that the correlation is very high for 72 days, then over time it breaks down and all of those things together make me really bullish right now. I think the markets will decouple. I think stocks and bonds could continue to fall for years to come, while cryptocurrencies could rise.”
Bonds and Invasion of Russia
Chung then asked about the drop in the price of bitcoin in February. Bitcoin crashed shortly after news broke that Russia was about to invade Ukraine.
“I think the big macro issue here is that the Fed is way behind and will have to raise rates much higher than what has been talked about. In our letter to investors on December 7, we said it was a Ponzi. The bond market is being manipulated by the Fed. They had pushed the value of the bonds $15 trillion above their 50-year real interest price, and it was going to rise rapidly, and it did. Bonds are up 100 basis points in yield since we predicted that.”
“What we did not predict is that this would have a very negative impact on cryptocurrencies. So if you trade and something goes wrong, then you’re wrong, and I think in this case the markets are wrong, and blockchain will eventually decouple from the other asset classes. If you think about it, with interest rates going up, that’s mathematically negative for bonds. It also negatively affects everything else with discounted cash flows like stocks or real estate, but crypto is completely independent of rates.”
He expects cryptocurrencies to return to normal growth.
“So I can see us in six months where the other asset markets are still struggling and crypto is back to its typical 2.5x a year growth that it has been doing for 11 years.”
Bitcoin becomes $100,000
When asked about his prediction of where the Bitcoin price would be in a year or two, Morehead said:
“We’ve been doing this for a long time, and Bitcoin is up 2.5x on average in 11 years, and sometimes it’s ahead of things and it has a bubble, and sometimes it’s in a bear market, like right now. And right now I see 60% below that 11-year trend regression. So our normal forecast is that in a year we will be 2.5 times taller. That brings you to around $100,000 per bitcoin. And although that number sounds crazy. I think this is quite likely to happen.