Deutsche Bank: Bitcoin to Grow 30% by December, Thanks to Correlation with S&P 500

Deutsche Bank analysts predict that Bitcoin (BTC) will rebound to $28,000 by December 2022 as the cryptocurrency market continues to face difficulties.

The value of Bitcoin and the wider cryptocurrency markets have suffered over the past six months, with BTC in particular experiencing its worst quarter in 10 years. Macroeconomic conditions around the world have contributed to this, with stagnant markets and fears of inflation driving conventional stock markets and their crypto-counterparts down to painful lows.

Deutsche Bank analysts Marion Laboure and Galina Pozdnyakova's report offers a fresh perspective on the medium-term outlook of BTC. The insights in their report indicate that cryptocurrency markets have followed the movements of Nasdaq 100 and S&P 500 since late 2021.

The pair believe that the S&P will rebound to its January levels and that Bitcoin's correlation to the index could result in a 30% increase in value from current levels midway through 2022. This would see BTC back up to the $28,000 mark.

JPMorgan predicts that the crypto market will soon see an end to deleveraging, which should lead to a better future.

The prediction may help to ease some of the fear and uncertainty that are present in the market, but it is not clear how markets will recover. Laboure and Pozdnyakova pointed out two recent collapses of cryptocurrency ecosystems, Terra's and Celsius's, as factors that have had an impact on the market:

“Stabilizing token prices is hard because there are no common valuation models like those within the public equity system. In addition, the crypto market is highly fragmented. The crypto freefall could continue because of the system’s complexity.”

JPMorgan, a separate investor in the crypto ecosystem, believes that the market may be on its way to recovery. While hedge fund Three Arrows Capital went bankrupt after failing to meet margin calls from investors during the crypto market crash, some industry players have propped up the ecosystem:

“The current deleveraging cycle may not be very protracted given the fact that crypto entities with the stronger balance sheets are currently stepping in to help contain contagion and that venture-capital funding, an important source of capital for the crypto ecosystem, continued at a healthy pace in May and June.”

The note also emphasized the relatively healthy amount of venture capital investment into cryptocurrency firms over the past two months — to the tune of $5 billion. This is a $3.4 billion increase from the same period in 2021.