Will Bitcoin crash to $20,000 if Nasdaq enters a bear phase? Peter Schiff, a seasoned investor and Bitcoin critic has said that world’s largest cryptocurrency, Bitcoin, may be in for a poor show if the Nasdaq gets into bear territory.
Cryptocurrency Bitcoin’s prices are often seen to be linked to movements in US technology stocks and Nasdaq. Peter Schiff suggests that this correlation could negatively impact the cryptocurrency if the Nasdaq experiences a bear phase.
Regarding Bitcoin’s potential decline, Schiff observed that with the Nasdaq already showing a 12% decrease, further market corrections could severely affect Bitcoin prices. He stated on X (formerly Twitter), “If the Nasdaq is down 20%, Bitcoin will be about $65K.”
Schiff spoke of previous market crashes, noting substantial Nasdaq declines: “After the Dot-com bubble burst, it fell nearly 80%. During the 2008 financial crisis, it declined 55%, and in the 2020 COVID crash, it dropped about 30%.” He suggests that a 40% index decline could push Bitcoin towards or below $20,000.
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Despite Bitcoin’s current positive performance, driven by spot Bitcoin ETF investments and increased mainstream acceptance, Schiff contends that a stock market downturn could trigger widespread selling, affecting Bitcoin prices. “A drop of that magnitude would accelerate Bitcoin’s collapse to much lower levels,” he cautioned.
Schiff highlighted gold’s inverse relationship with the Nasdaq, stating, “Since the Nasdaq peaked on December 16, 2023, gold is up 13%, almost a perfect 1-to-1 inverse correlation.” He anticipates gold potentially exceeding $3,800 per ounce if stocks decline and the dollar weakens.
Furthermore, Schiff suggests this situation could challenge Bitcoin’s status as a value store. “Since this divergence would likely shatter the notion that Bitcoin is comparable to gold, there would be no justification for the US government or any state government to hold Bitcoin in a Strategic Reserve,” he said.
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Below is the full text of Peter Schiff’s post on X:
The NASDAQ is down 12%. If this correction turns out to be a bear market, and the correlation where a 12% decline in the NASDAQ equates to a 24% decline in Bitcoin holds, when the NASDAQ is down 20%, Bitcoin will be about $65K.
But if the NASDAQ goes into a bear market, history shows that the decline will be much larger. Following the bursting of the Dot-com bubble, it fell almost 80%. During the 2008 GFC, it fell 55%, and during the COVID crash in 2020, it fell about 30%. The average of those three bear markets is a 55% decline. If this bear market bottoms with just a 40% decline, that would put Bitcoin at about $20K. However, my bet would be that a drop of that magnitude would accelerate Bitcoin’s collapse to much lower levels.
On the other hand, the correlation between the NASDAQ and gold has been negative. Since the NASDAQ peaked on Dec. 16th, 2023, gold is up 13%, almost a perfect 1-to-1 correlation. So, if that correlation holds too, a 40% drop in the NASDAQ would put gold over $3,800. However, my guess is that if a bear market in stocks coincides with a significant decline in the dollar on foreign exchange markets, gold will rise much higher.
But even at $3,800 gold and $20K Bitcoin, in terms of gold, Bitcoin will be down over 85%. Given that such a divergence will likely end the pretense that Bitcoin is a store of value similar to gold, there will clearly be no justification for the U.S. government or any state government to keep any Bitcoin in a Strategic Reserve. There will also be no reason for ETF investors to keep holding their positions either. With all that selling, it will be impossible for $MSTR to sell enough Bitcoin to avoid bankruptcy.
(Disclaimer: Recommendations are views given by experts are their own. These opinions do not represent the views of The Times of India)
