Overall, bitcoin has had a successful year. Since the beginning of 2021, the value of digital currency has increased by approximately 70 percent, bringing the total worth of the crypto market to a combined $2 trillion.
In April, the first significant crypto business went public with Coinbase; Goldman Sachs boosted engagement, and the first U.S. exchange-traded fund connected to bitcoin was approved.
However, recent price volatility and heightened regulatory scrutiny have reduced bitcoin’s potential. There are also concerns of a market decline, according to specialists.
In light of the current volatility in digital currencies, CNBC has compiled a list of experts’ most optimistic forecasts for the year ahead.
According to some analysts, Bitcoin’s value is expected to fall sharply over the next several months. In November, the cryptocurrency hit a record high of about $69,000. As of this writing, it’s hovering around $50,000, down approximately 30% from its high. A loss of 20% or more from recent highs is considered a bear market by Wall Street, but it’s important to remember that bitcoin is infamous for its volatility.
An academic at Sussex University believes that the bitcoin ETF will fall as low as $10,000 in 2022, erasing all of its gains from the last year and a half in value.
Alexander said that Bitcoin’s price is expected to fall significantly in the following year. Bitcoin “has no basic basis,” which is the basis of her pessimism. Alexander feared that history would repeat itself. After soaring to almost $20,000 a few months earlier, bitcoin fell to close to $3,000 in 2018. The cryptocurrency’s supporters often claim this time is different because more institutional investors are entering the market.
Bitcoin’s price trend, according to Todd Lowenstein, chief equities strategist at Union Bank Private Banking, “appears to match many past asset bubbles” and “is carrying a ‘this time it’s different’ narrative exactly like prior bubbles,”
Bitcoin is a typical investing argument that protects investors against government stimulus-induced inflation. According to Lowenstein, a more hawkish Federal Reserve might scupper bitcoin’s momentum.
Goldilocks’ circumstances are ending, and the liquidity tidal is receding, he added, a fact that will disproportionately impact overpriced asset classes and speculative sections of the market, including cryptocurrency.
As previously thought, not everyone is persuaded that the crypto-cash party will finish in 2022. According to Yuya Hasegawa, a crypto market analyst at Japanese digital asset exchange Bitbank, “the main risk element, namely [quantitative tapering] by the Fed, has been chosen and presumably factored in already.”
The approval of the first spot bitcoin ETF in the United States is a significant move for crypto investors in 2022. “value” functions more like a “toy” than an investment.
ProShares’ ETF may be too dangerous for beginner traders, many of whom are involved in crypto since it tracks futures prices rather than bitcoin itself, analysts warn.
Vijay Ayyar, vice president of corporate development and worldwide growth at crypto exchange Luno, stated that the Bitcoin Futures ETF released this year has been primarily considered as not particularly retail-friendly because of the significant charges associated with rolling over contracts, which amount to roughly 5% to 10%.
There is increasing pressure/evidence that a Bitcoin Spot ETF will be allowed by the SEC in 2022, mainly because the market is big and developed enough to sustain one.”
While bitcoin’s market share has decreased over time, other digital currencies like ethereum have grown in importance. Analysts predict this trend to continue into the new year as investors shift their focus to smaller areas of the crypto market to make more significant returns.
Coins to keep an eye out for in 2022 include ethereum, polkadot, and Cardano, according to Alexander of Sussex University.
Retail investors will migrate to other blockchain-based currencies that genuinely perform a crucial and primary purpose in decentralized finance once they recognize the perils of trading bitcoin, she added.
Next year, Alexander predicted that bitcoin’s value would fall to “less than half the aggregate value of smart contract currencies,” such as ethereum and Solana.
In the following months and years, authorities will be scrutinizing stable coins “when they look into their underlying collateral and how much leverage they are using,” said Lowenstein.
For many, the housing and mortgage crises are etched in the minds of many when risk appetites were aggressively re-pricing.
As a result, authorities are also taking a closer look at the Defi market. Earlier this month, the Bank for International Settlements, a central bank umbrella organization, said it was concerned about services claiming to be “decentralized” when that may not be the case and urged regulation.