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As 2021 winds to a close, analysts and market observers make predictions for how the crypto industry will generally fare in 2022.
Bitcoin (BTC) is up by approximately 70% since the start of 2021. Singlehandedly, the king coin is a major contributing force to the crypto market cap of $2 trillion. It has been an eventful year for crypto and as it winds to a close, analysts are now giving their predictions for 2022.
This year had so many highs and almost as many lows for the crypto space. For instance, Coinbase debuted back in April as the first major crypto exchange platform to go public. In addition, an increasing number of leading mainstem financial institutions, such as Goldman Sachs, leaned more toward crypto adoption. Arguably the most prominent crypto-related news in the fourth quarter of 2021 was the US approval of a BTC ETF.
However, despite these breakthroughs and strides, increasing regulatory scrutiny and sharp price fluctuations have also peppered the crypto industry. The increasing frequency of these now leads analysts to believe that BTC will sharply decline in the coming months in 2022.
BTC is notorious for its extreme volatility. After holding steady throughout the first quarter of 2021 and cresting above $60K, it plummeted to half its value in short order. Notwithstanding, the leading crypto regained and rode a five-month rally from April to September. It eventually culminated in an all-time high of approximately $69K in November. However, as of press time, BTC is below the $50K threshold, representing a 30% drawdown from its previous summit.
Carol Alexander, a professor of finance at Sussex University, says she expects BTC to drop even further in 2022. According to her, she foresees a price drop as low as $10K next year. This would essentially erode all previous BTC gains dating back to a year and a half. Regardless, Alexander remains certain because she believes that BTC lacks “fundamental value” and is not a deeply-rooted investment. Alexander further warned BTC investors saying:
“If I were an investor now I would think about coming out of Bitcoin soon because its price will probably crash next year.”
The regulation was a key issue many had with the crypto industry throughout 2021, and analysts expect more of the same in 2022. In 2021, regulatory reactions from governments ranged from China’s total crypto ban to the US honing in on specific aspects of crypto. Vijay Ayyar of crypto platform Luno says regulation will retake center stage next year. Ayyar believes so, mainly because the US has ventured further into the crypto space. For instance, the SEC greenlit the establishment of the ProShares’ Bitcoin Strategy ETF on October 19th, which was the first of its kind. Ayyar now expects to see more clarifications on what the SEC deems to be digital currencies.
Crypto Predictions Also Earmark the DeFi Space to Have a Stronger Showing in 2022
The emergence of DeFi is also a major talking point for 2021, which analysts expect to play a bigger role in 2022. In fact, native tokens with their own networks are a promising bunch. Examples include Ethereum, Solana, Polkadot, and Cardano.
DeFi-backed coins are constantly eating into BTC’s market share. Sussex’s Alexander also touched on this saying:
“As retail investors begin to realize the dangers of trading bitcoin, especially on unregulated venues, they will switch to…other coins belonging to blockchains which actually serve an essential and fundamental role in decentralized finance.”
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