The past year has been a year of plenty for the digital asset market. Bitcoin rose from $29,000 to $69,000 at an annual high. What to say about its “younger brothers” – altcoins, the growth of some of which was measured in tens of thousands of percent. The total capitalization of the market grew from $759 billion to $3 trillion at a high of 2021.
An important growth driver was the inflow of institutional investors’ money into BTC, which increased their cryptocurrency balances throughout the year. The first thing worth mentioning here is MicroStrategy with its CEO, the most convinced bitcoin optimist of all time, Michael Sailor. The company has brought the amount of crypto on its balance sheet to 121,044 thousand BTC with an average purchase price of $29,534 thousand. At a rate of $50 thousand per coin on its balance sheet is already about $6 billion of savings in crypto.
Elon Musk first caused a powerful rise with tweets about buying $1.5 billion worth of bitcoin for Tesla’s balance sheets, then provoked a collapse with news about stopping accepting bitcoin as a means of payment for new Teslas, then flirted with declarations of love for the Dogecoin coin. But the fact remains that even after a small sale, Tesla remains a large holder of bitcoin, and Musk himself keeps some of his personal funds in it and ether.
Another factor of growth was El Salvador accepting bitcoin as an official means of payment at the state level. Also, inflation rose to record highs in decades making noninflationary assets, such as bitcoin, more attractive.
WHAT WILL AFFECT THE BITCOIN PRICE IN 2022?
No one knows the future but community and experts are expecting:
From the positive. Analysis of the information space allows us to draw the following expectations:
- Active adaptation of bitcoin by the world of classical finance is likely to continue. The Lightning network will continue to actively develop, which will make bitcoin even more accessible as a means of payment.
- Major financial companies and banks will continue to develop the crypto direction.
- Australia says it wants to become the first major Western country to launch its own digital currency and fully legalize bitcoin at the legislative level. In 2022, news from this country could support the exchange rate.
- It is possible that, following El Salvador, 1-2 other developing countries will adopt bitcoin as official tender.
On the negative side:
- The U.S. Federal Reserve is likely to exit the quantitative easing (QE) program entirely and start a cycle of interest rate hikes. This is necessary to combat accelerating inflation and will likely lead to a continuation of the dollar’s strengthening trend. A rising dollar and declining global liquidity is a key negative factor for the cryptocurrency market in 2022.
- A correction in stock indices is likely. According to legendary investor Charlie Munger, there is a bubble in stocks that even surpasses the dotcoms in the noughties. If the stock market is severely turbulent, investors will have little to do with crypto and it could behave even more volatile.
- In the U.S. plans to tighten regulation of digital assets are being discussed. On the one hand, it’s good that the market will become more transparent. On the other hand, the crypto community traditionally has a negative attitude to such news.
A lot of positive and negative news is expected. If the main expectations come true, it will lead to a significant increase in market volatility. However, crypto investors are not used to price chatter, the main thing is that collapses are followed by growth.