Given all that has happened, Bitcoin had a pretty good year. The leading digital currency has risen nearly 70% since early 2021, bringing total market value above the $ 2 trillion mark. The past year has seen many standout events like the first major crypto company to go public with the launch of Coinbase in April, Wall Street banks like Goldman Sachs increasing their stake, and swap funds United States.

Recently, however, close regulatory scrutiny and strong price volatility have dampened the outlook for Bitcoin. Even experts warn that the market is falling into a recession.

While the coming year looks like another roller coaster ride for cryptocurrencies, prominent analysts have made several key predictions.

Cryptocurrency crash

Some experts assume that Bitcoin will collapse in the coming months.

The leading cryptocurrency hit a record high near $ 69,000 in November, but the price has steadily declined since then, operating below the $ 50,000 mark, nearly 30% less than ATH. Wall Street gurus define a bear market as a market decline of 20% or more from its recent high, but it’s worth noting that Bitcoin is notorious for its volatility.

BTC 1 Day Price Chart | Source: Tradingview

University of Sussex finance professor Carol Alexander said she predicts Bitcoin will plummet to as low as $ 10,000 by 2022, which would wipe out almost all profits made in the past year and a half.

“If I were an investor, I would consider getting out of Bitcoin because the price could fall in the next year.”

Their bearish prediction is based on the notion that Bitcoin has “no fundamental value” and is more of a “toy” than an investment.

Alexander warns that history will repeat itself. In 2018, Bitcoin fell to nearly $ 3,000 after climbing to a high of around $ 20,000 a few months ago. Meanwhile, crypto advocates often say that this time around, as more institutional investors enter the market, things are different.

Todd Lowenstein, Director of Equity Strategy, Union Bank’s Private Banking division, said:

“Undoubtedly, the Bitcoin price chart appears to be following the same path as many of the bubbles and collapses of historical assets. It also carries the same “different this time” story as the other bubbles.

A common use case for investing in Bitcoin is that it acts as a hedge against government-stimulated inflation. According to Lowenstein, there is a risk that the Federal Reserve (Fed) could deal a fatal blow to Bitcoin.

“The equalization conditions end and the wave of liquidity subsides. This will disproportionately harm overvalued asset classes and the speculative sector of the market, including cryptocurrencies. ”

However, not everyone believes the crypto party will end in 2022. Market analyst Yuya Hasegawa of the Japanese digital assets exchange Bitbank said:

“The biggest risk factor, namely the quantitative tightening by the Fed, has been decided and probably already priced in.”

First Spot Bitcoin ETF

A big move that investors are waiting for in 2022 is the first US spot Bitcoin ETF to be accepted.

Although the US Securities and Exchange Commission (SEC) gave ProShares the green light to launch a Bitcoin Strategy ETF earlier this year, the product relies on Bitcoin futures contracts rather than allowing investors direct exposure to that cryptocurrency .

A futures contract is a derivative financial instrument that obliges an investor to buy or sell an asset at an agreed price at a later date. Experts say a ProShares ETF may be too risky for inexperienced traders to invest in cryptocurrencies by tracking futures prices instead of Bitcoin itself.

Vijay Ayyar, Vice President of Corporate Development and Global Expansion at Luno Exchange said:

“The Bitcoin Futures ETF launched this year is viewed by many as unfriendly for private investors, as the high costs associated with expiring contracts of around 5-10% are incurred.”

“More pressure / evidence suggests that a spot Bitcoin ETF will be approved in 2022, largely because the market is now large and mature enough to support it.”

Grayscale Investments has filed an application to convert its Bitcoin Trust (the world’s largest Bitcoin fund) into a spot ETF. At the same time, many other Bitcoin ETF applications are also waiting to be reviewed.

From capital DeFi. do

As the cryptocurrency industry grows, Bitcoin’s market share is falling and other digital currencies like ETH play a much bigger role. Analysts expect this to continue into the next year as investors increasingly look to smaller cryptocurrencies in hopes of big gains.

Alexander from the University of Sussex highlighted ETH, SOL, DOT and ADA as coins to watch in 2022.

“As retail investors begin to realize the dangers of Bitcoin trading, especially in unregulated locations, they will turn to other blockchain coins that really play an essential role and foundation for decentralized funding. Next year around this time, I predict that Bitcoin’s market capitalization will be half the total capitalization of smart contract coins like ETH and SOL or less. ”

Bryan Gross, system manager of the ICHI crypto platform, said:

“New crypto developments like decentralized finance and decentralized autonomous organization (DAO) are likely to be the fastest growing areas of the crypto space.”

DeFi aims to replicate traditional financial products with no middlemen, while DAO is seen as a new breed of internet community.

Total deposits in DeFi services exceeded $ 200 billion this year for the first time this year, and experts predict that demand will continue to rise in 2022.

DeFi is part of a broader trend in Web3 technology. The Web3 movement is creating a new, decentralized version of the internet that includes blockchain and cryptocurrency technologies like NFT. It is inevitable to be questioned, however, and Elon Musk or Jack Dorsey are prominent names among them, Bitcoin Magazine reports.

A great year on the legal front

Regulators have been tougher on cryptocurrencies this year, with China completely banning all related activities and US authorities putting pressure on certain aspects of the market. Many analysts predict that regulation will be a key issue for the sector in 2022.

Lunos Ayyar says:

“2022 will be an important year in legal terms. The interest of many governments, especially the United States, in bringing regulation into the crypto space has never been as strong as it is now. ”

Ayyar hopes to gain clarity about the legal “gray area” of other cryptocurrencies than BTC and ETH, which according to the SEC are not securities.

The blockchain company Ripple takes on the US watchdog on XRP, as reported by Bitcoin Magazine. The SEC claims that XRP is an unregistered security and that Ripple and two executives illegally sold $ 1.3 billion in coins. For its part, Ripple says XRP shouldn’t be viewed as a security.

Another important area that regulators are likely to focus on over the next year is stablecoins, experts say. These are tokens whose value is tied to existing assets such as US dollars. The world’s largest USDT stablecoin is particularly controversial amid concerns about whether Tether has enough assets in its reserve to support its dollar-pegged price.

Löwenstein said:

“Stablecoins will certainly pay more attention as the regulator takes into account the soundness of the underlying collateral and the level of leverage used.

People need to remember when the collateral behind the real estate and mortgage crisis was called into question and the demand for risk was drastically pre-priced. ”

Meanwhile, regulators are also starting to monitor the DeFi room. Earlier this month, the central bank’s umbrella group, the Bank for International Settlements, called for DeFi to be regulated, saying it was concerned that self-marketing services were “decentralized” when it may not be right.

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