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Crypto crash
Some experts believe that Bitcoin will suffer a sharp drop in the coming months.
Bitcoin rose to a record high of nearly $ 69,000 in November. It is now below $ 50,000, almost 30% below its peak. Wall Street wisdom defines bear markets as a decline of 20% or more from recent highs, but it's worth noting that Bitcoin is known for its volatility.
Carol Alexander, a finance professor at the University of Sussex, said she expects bitcoin to stagnate as low as $ 10,000 in 2022, virtually erasing all of its gains in the past year and a half.
"If I were an investor now, I would think about exiting bitcoin soon because its price will likely collapse next year," Alexander said. Its bearish call is based on the notion that bitcoin "has no fundamental value" and serves more as a "toy" than an investment.
Alexander warns that Bitcoin could plummet, as it has in the past, after a huge surge in price. In 2018, bitcoin fell close to $ 3,000 after climbing to a high of almost $ 20,000 a few months earlier. Cryptocurrency supporters often say that things are different this time, as more institutional investors are entering the market.
"Without question, the Bitcoin price chart seems to track a lot of bubbles and historical asset crashes and has a 'this time is different' narrative just like other bubbles," said Todd Lowenstein, chief equity strategist for the branch. Union Bank private banking.
A common investment case for bitcoin is that it serves as a hedge against rising inflation caused by government stimulus. Lowenstein said there is a risk that a More aggressive Federal Reserve it can blow the wind out of bitcoin sails.
"Goldilocks conditions are ending and the liquidity tide is receding, which will disproportionately hurt overvalued asset classes and speculative areas of the market, including cryptocurrencies," he said.
Still, not everyone is convinced that the crypto festival will end in 2022. "The biggest risk factor, namely [quantitative tapering] by the Fed, it has already been decided and has probably already been included in the price, "said Yuya Hasegawa, crypto market analyst at Japan's Bitbank exchange.
First place bitcoin ETF
One big development that cryptocurrency investors are looking forward to in 2022 is the approval of the first exchange-traded bitcoin fund in the United States.
Although the Securities and Exchange Commission gave the green light to the launch of ProShares Bitcoin strategy ETF This year, the product tracks bitcoin futures contracts rather than giving investors direct exposure to the cryptocurrency itself.
Futures are financial derivatives that force an investor to buy or sell an asset at a later date and for an agreed price. By tracking futures prices rather than the bitcoin itself, experts say, the ProShares ETF could be too risky for novice traders, many of whom invest in cryptocurrencies.
"The Bitcoin Futures ETF that launched this year has been widely viewed as unfriendly for retail due to the high costs involved in renewing contracts, amounting to around 5-10%," said Vijay Ayyar, Vice President corporate development and global expansion. on the Luno crypto exchange.
"Increasing pressure / evidence ... points to the approval of a Bitcoin spot ETF in 2022 primarily because the market is now large and mature enough to support one."
Grayscale Investments has submitted an application to convert its bitcoin trust, which is the largest bitcoin fund in the world, in a spot ETF. And here they are many other bitcoin ETF apps Waiting in the wings.
Rotation in 'DeFi'
As the crypto industry has evolved, bitcoin's share of the market has declined, with other digital currencies such as ethereal playing a much more important role. This is something that analysts expect to continue next year as investors increasingly look to smaller crypto exchanges in hopes of making big profits.
Alexander of the University of Sussex pointed out ethereum, solarium, moles Y cardano as coins to watch in 2022.
"As retail investors begin to realize the dangers of trading bitcoins, especially in unregulated places, they will switch to ... other blockchain currencies that actually serve an essential and pivotal role in decentralized finance. ", He said.
"This time next year I predict that bitcoin's market capitalization will be half the combined capitalization of smart contract currencies" like ethereum and solana, Alexander added, "or even less."
Emerging crypto developments, such as decentralized finance and decentralized autonomous organizations, are likely to be "the fastest growing areas of cryptocurrencies," said Bryan Gross, network administrator for crypto platform ICHI. DeFi Goals to recreate traditional financial products without intermediaries, while DAOs can be considered as a new kind of internet community.
Total money deposited into DeFi services topped $ 200 billion for the first time this year, and experts expect demand to grow even further in 2022.
Web3, a move calling for a new decentralized iteration of the internet, is also expected to gain more traction next year. Web3 encompasses DeFi and other blockchain technologies like non-fungible tokens. Has already met skeptics in the size of Elon musk Y Jack dorsey.
'A great year on the regulatory front'
Regulators flexed their muscles on crypto this year, with China completely ban all activities related to cryptocurrencies and US authorities breaking on certain aspects of the market. Analysts expect regulation to be a key issue for the sector in 2022.
"2022 will be a great year on the regulatory front, without a doubt," Ayyar de Luno said. "The interest of various governments, and especially the US, in bringing regulation into the crypto space has not been greater."
Ayyar said he hopes to see some clarification on the legal "gray zone" for cryptocurrencies other than bitcoin and ethereum, which the SEC has said are no values.
The blockchain company Ripple is closing horns with the US watchdog about XRP, a cryptocurrency with which it is closely associated. The SEC alleges that XRP is an unregistered security and that Ripple and two of its executives illegally sold tokens worth $ 1.3 billion. For its part, Ripple says that XRP should not be considered a security.
Experts say another key area regulators will likely focus on next year is stable coins. These are tokens whose value is tied to the price of existing assets such as the US dollar. Tether, the world's largest stablecoin, is particularly controversial as there are concerns about whether it has enough assets in its reserves to justify its peg to the dollar.
"There is undoubtedly increased scrutiny around stablecoins as regulators look under the hood on the strength of the underlying collateral and the amount of leverage deployed," Lowenstein said.
"People remember all too well when the collateral behind the housing and mortgage crisis became suspect and risk appetite aggressively appreciated."
Meanwhile, regulators also began to scrutinize the DeFi space. Earlier this month, the central bank's umbrella group, the Bank for International Settlements called for the regulation of DeFi , saying you are concerned that services will market themselves as "decentralized" when that may not be the case.
