Investment Guide

2022 can be a bad year for Bitcoin investing, Read why

Year after year, the price of bitcoin has increased by almost 70%. Boost the total value of the entire crypto market to 2 trillion US dollars. However, the recent tightening of regulatory scrutiny and severe price volatility have dampened the prospects of bitcoin. Experts have warned that bitcoin could be headed for a bearish trend.

Will bitcoin crash?

Some experts have warned that there will be a huge drop in bitcoin in the coming months.

In November, the price of bitcoin reached a record high of around $69,000. Currently, bitcoin is under $50,000, which is about 30% less than its peak value. Wall Street defines a price decline of 20% or more from recent highs as a bear market. But it is worth noting that bitcoin is notorious for its volatility.

Carol Alexander, a professor of finance at the University of Sussex, has predicted that bitcoin will drop to a low of $10,000 in 2022, wiping out almost all gains over the past year and a half.

“If I were a bitcoin investor, I would consider getting out of bitcoin as soon as its price could drop next year,” Alexander said. The reason he is short on bitcoin is that bitcoin is “basically worthless.” It’s not so much an investment as it is a “toy”.

Alexander warned that bitcoin could fall as it did in the past after a sharp rise in price. In 2018, bitcoin fell around $3,000, having climbed as high as nearly $20,000 a few months ago. Bitcoin supporters often say that this time the situation is different as more and more institutional investors are entering the market.

Todd Lowenstein, chief equity strategist at Union Bank’s private banking division, said bitcoin’s price action is similar to that of many asset bubbles in history, and people always think “this time is different.”

A common reason to invest in bitcoin is that it can be used as a hedge against rising inflation due to government stimulus measures. Lowenstein said the Fed’s aggressive stance could undermine the highly valued asset and the growth momentum of bitcoin.

However, not everyone believes that the bitcoin carnival will end in 2022. Yuya Hasegawa, a cryptocurrency market analyst at Japanese bitcoin exchange BitBank, said:

“The biggest risk factor, the Fed’s quantitative easing has come down, could be reflected in prices.”

1st Place Bitcoin ETFs

A major development that cryptocurrency investors are paying attention to is the fact that the United States will approve bitcoin exchange-traded funds (ETFs) in the first place in 2022.

Although the U.S. The Securities and Exchange Commission (SEC) this year approved the launch of the ProShares Bitcoin Strategy ETF, the product that tracks bitcoin futures contracts, not the cryptocurrency.

Vijay Iyer, vice president of corporate development and global expansion at cryptocurrency exchange Luno, said:

“The Bitcoin Futures ETF launched this year is generally not considered very favorable for retail investors, as the cost of raising the contract is very high, around 5-10%.”

“There is increasing evidence that the Bitcoin Spot ETF will be approved in 2022, primarily because the market is now large and mature enough.”

Asset management company Grayscale Investments has applied to convert its bitcoin trust fund into a spot ETF. In addition, there are several other bitcoin ETFs awaiting approval.

switch to defi

With the growth of the encryption industry, the market share of bitcoin has declined, while other digital currencies such as Ethereum are playing a more important role. Analysts anticipate this situation to continue over the next year as investors are increasingly looking at smaller cryptocurrencies in anticipation of big gains.

Alexander from the University of Sussex added Ethereum, Solana, Polkadot, and Cardano to his list of cryptocurrencies to watch in 2022.

She added: “As retail investors begin to realize the dangers of trading bitcoin, especially in unregulated spaces, they will turn to other currencies in the blockchain space that is playing a role in truly decentralized finance. vital role.”

“At this time next year, I expect the market cap of bitcoin to be half or even less than the total market cap of smart contract coins (such as Ethereum and Solana).” Sikandar added.

Brian Gross, network director for encryption platform ICHI, said that decentralized finance (DeFi) and decentralized autonomous organizations (DAOs) “could be the fastest-growing segment of the encryption sector.” DeFi aims to recreate traditional financial products without intermediaries, and DAOs can be thought of as a new type of Internet community.

The data shows that the total lock-up volume of this year’s DeFi protocols has exceeded US$200 billion for the first time. Experts predict that demand will increase further in 2022.

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