Bitcoin has seen a remarkable rise this year, but gold supporter, renowned economist and Bitcoin's arch-nemesis Peter Schiff has issued another warning, stating that if the US stock market enters a Bear Market, Bitcoin could plummet to $20,000 or even lower.
He believes that if this happens, the notion of Bitcoin as "digital gold" will be completely rejected by the market, and MicroStrategy (MSTR), which holds a large amount of Bitcoin, may face the risk of a broken financial chain and even bankruptcy.
Is the US stock market heading for a Bear Market? Bitcoin may be dragged down
Schiff analyzed on X that the NASDAQ index has already fallen 12%. If this is just a market correction, Bitcoin's performance may still be acceptable, but if the US stock market further weakens and officially enters a Bear Market, it will have a huge impact on Bitcoin.
Looking back at history, the declines of the NASDAQ index during the three major crashes were:
- 2000 Dot-com bubble: down 80%
- 2008 Financial crisis: down 55%
- 2020 COVID-19 stock market crash: down 30%
The average decline of these three Bear Markets was 55%. Schiff estimates that even if the decline is "moderate" this time, at only 40%, Bitcoin could still fall to $20,000, which is still a relatively optimistic scenario. Schiff believes:
Bitcoin has been highly correlated with risky assets for a long time, and when market liquidity tightens and investor confidence is shaken, Bitcoin will inevitably suffer a massive sell-off.
Gold VS. Bitcoin: The market's choice of a hedge will be revealed
Schiff further pointed out that since December 16, 2023, the NASDAQ and gold have shown a negative correlation. As the US stock market has declined, the price of gold has risen by 13%, almost forming a 1:1 inverse relationship.
If this trend continues, and the NASDAQ falls further by 40%, the price of gold could break through $3,800 or even higher. Schiff believes that in this scenario, the market will vote with its capital, and the true safe-haven asset will not be Bitcoin, but gold. He emphasized:
When investors sell off risky assets, Bitcoin will not become a safe haven, but will fall along with the stock market. If market confidence collapses, the price of Bitcoin could be far below $20,000.
Is MSTR facing liquidation risk? Its leveraged position may become a burden
Schiff further warned that if Bitcoin plummets, MicroStrategy (MSTR) may find itself in a financial crisis. The company has been leveraging to continuously increase its Bitcoin holdings in recent years, and has viewed Bitcoin as its primary asset. This strategy carries significant risk in a Bear Market.
If the price of Bitcoin falls below $20,000, MSTR's leveraged position may trigger a Margin Call, forcing the company to sell Bitcoin to maintain financial stability. Schiff believes that the market's selling pressure will further exacerbate the situation, creating a vicious cycle.
In simple terms, when MSTR needs to sell Bitcoin to address financial pressures, the market price will further collapse, causing MSTR to incur even greater losses, and potentially leading to bankruptcy.
Different market views: Will Bitcoin really fall below $20,000?
Although Schiff believes Bitcoin will collapse, there are also different voices in the market:
- Increased mainstream adoption of Bitcoin supports market demand
Many investors believe that with the approval of Bitcoin ETFs by regulatory authorities, and the gradual increase in holdings by governments and institutional investors globally, the market structure of Bitcoin is different from the past, and even if the US stock market declines, Bitcoin may not necessarily repeat its historical collapse.
- Fall below $20,000? This is a rare buying opportunity
Some investors believe that if Bitcoin really falls below $20,000, this will be a rare long-term buying opportunity. Especially in the context of rising gold prices and declining purchasing power of fiat currencies, many investors may seize the opportunity to enter the market.
- Bitcoin's trading advantages still exist, and it will not be completely replaced by gold
Although the notion of Bitcoin as "digital gold" may be challenged, as a global trading medium and decentralized asset, Bitcoin's market value still exists. Even with violent price fluctuations, it may still maintain a certain market position in the future.
