Legendary investor Mark Mobius, now the head of Mobius Capital Partners, has just put out a $10,000 price target for Bitcoin (BTC 0.12%). He's now convinced that Bitcoin will trade around its current level of $17,000 over the near term before plummeting as much as 40% in 2023. Bitcoin at $10,000 would bring the crypto back down to its October 2020 level, essentially wiping out all the Bitcoin wealth created in the past bull market.
Mobius, of course, is known as "the godfather of emerging markets" and is no stranger to risk. Over a 30-year career, he helped turn emerging markets into an asset class when he was at Franklin Templeton Investments, and he certainly knows what can happen in volatile, unproven, and unregulated markets. If Mobius is calling a $10,000 price target for Bitcoin, is it time to get out now before the bottom falls out?
Two reasons Bitcoin might hit $10,000
As Mobius sees it, there are several good reasons Bitcoin could sink as much as 40% next year to the $10,000 level. The first and most important reason, says Mobius, is inflation and the Federal Reserve's "printing machine." During the crypto boom, there was easy money, and people had plenty of money to speculate in crypto. But now that the Fed is tightening monetary policy and raising rates, this situation will disappear.
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Secondly, Mobius notes that Bitcoin has continued to break through technical support levels, showing potential weakness. Each time Bitcoin breaks through one of these levels, it makes it much easier to fall to the next support level. Back in May, for example, when Bitcoin was trading at $28,000, Mobius suggested it would fall to $20,000. Now that Bitcoin has broken through the $20,000 support level, it is testing the $16,000 support level. From there, it's anyone's guess, but $10,000 seems most likely since that is the price Bitcoin fell to before a record bull market rally.
Emerging markets vs. crypto markets
Certainly, Mark Mobius makes some good points. But he is also viewing crypto markets via the prism of emerging markets. Back in the mid-1980s, Mobius literally oversaw the launch of the emerging markets asset class, and he has been actively involved with emerging markets ever since. From his vantage point, what is going on now with crypto must remind him a lot of what has happened to emerging markets over the past 40 years.
Mobius has described how impossible it was, due to the risk perception, to get people to invest in non-Western markets initially. This was the pre-internet era, and getting capital into and out of developing markets was hard work. The companies in these countries had no concept of corporate governance and unsophisticated risk management controls in place. Executives were primarily focused on enriching the elite, without concern for shareholders. Add in massive political risk, and it meant that financial contagion could spread overnight.
CRYPTO: BTC
Key Data Points
Sound familiar? This sounds almost exactly like the situation in the crypto market currently. We're seeing how a lack of regulation in the market has led to some shady -- some might say criminal -- activity. We're seeing how fast contagion can spread when the fundamental pillars of risk management and corporate governance are not in place. And we are seeing how the get-rich-quick mentality of many crypto founders creates negative incentives for long-term growth.
But guess what? The emerging markets asset class ultimately turned out to be one of the greatest innovations on Wall Street. Over the past 40 years, we've seen how globalization has turned into one of the most powerful investment theses ever. We've seen how nations formerly scorned as "third-world" eventually became massive economic juggernauts. And we've seen living conditions rise in nations from Asia to Latin America.
Is Bitcoin a buy?
All of this makes me hopeful that crypto will eventually turn into that same type of asset class. It's what the Bitcoin visionaries have always predicted and what nations like El Salvador -- the first nation ever to make Bitcoin legal tender -- are trying to accomplish now. Yes, crypto needs more regulatory oversight. Yes, crypto needs someone auditing the books at places like FTX. But it's hard not to see the same promise for crypto that Mobius once saw in emerging markets. For that reason, I'm convinced that $10,000 would be the bottom for Bitcoin.
As even Mobius concedes, it's been a bit amazing just how well Bitcoin has held up after the FTX contagion. He's surprised it's still holding fast to the $17,000 level. Call me a naive optimist, but there's no way I'm selling Bitcoin now. Even if Bitcoin begins to fall to the $10,000 level, I'm buying the dip all the way down. If there's one crypto to buy and hold forever, it's Bitcoin.
