In late 2021, the United States central banking system took a stricter stance on virtual assets and shook the walls of the cryptocurrency industry. While sparing other risky assets, the FED is putting cryptocurrencies under heavy scrutiny, including the world’s most valuable crypto asset – Bitcoin.
Undoubtedly, the Federal Reserve policy will play a key role in the debate over the future of crypto in 2022. However, to what extent will the FED tighten monetary policy to stem inflation and affect Bitcoin? Will this affect BTC options on Bitlevex as well? Is it going to mess up with the futures market?
In this article, you will understand why Bitcoin remained stagnant in 2021 and the prospects for 2022.
Is Bitcoin a “Bacteria”? – An Odd Theory to Explain Bitcoin’s Ups and Downs
Scientist Prateek Goorha carried out a somewhat unusual study on the cryptocurrency market. When evaluating the pattern of appreciation of Bitcoin’s price, the Harvard researcher found that the price fluctuation of this cryptocurrency follows the growth pattern of bacteria.
According to Goorha’s theory, microorganisms grow in four phases, three of which are relevant to bitcoins: stagnation, exponentiation, and stagnation again – all within a repeating cycle.
Practically, the scientist explains that, as the bitcoin market becomes more open to average investors, a lag phase occurs. Then, the inflow of money from the public again fuels the growth of the network.
Goorha adds that “although the price of Bitcoin falls after a big rise, the fall never falls below the previous price level.”
For example, in 2013 Bitcoin’s price rose from $100 to $1200. When the market stabilized and the price of the cryptocurrency dropped, it continued to trade at just over $200 – that is, double its pre-rise value.
What Will 2022 Bring to Bitcoin’s Value? – Experts Share Different Opinions
According to Katie Stockton, founder, and managing partner of Fairlead Strategies, the firm is bullish on the long-term Bitcoin price, based on trend-following metrics.
According to her, “We assume that the long-term uptrend will continue and that a more decisive break towards new highs will allow for an impressive movement projection to approximately $90,000.”
Chainalysis Chief Economist Philip Gradwell believes the apps will have a considerable effect on Bitcoin’s appreciation.
According to Gradwell, “A big lesson from Web 2.0 was that consumers love platforms and I doubt that will change with Web 3.0. There is currently no crypto platform that holds customer relationships and aggregates vendors.”
According to him, in 2022 many companies will rush to build this type of platform, with Coinbase in the lead because it integrates DeFi and NFTs.
FED, Metaverse, and Other Factors – How Will They Affect Bitcoin?
Differently, other lines of thought argue that as giants like Meta Platforms (which owns Facebook) and Apple move deeper into the metaverse and consumers become more interested in non-fungible tokens, cryptocurrencies will rise anyway – regardless of other macroeconomic forces.
“The biggest influencing factor for Bitcoin and cryptocurrencies in 2022 is central bank policy,” said finance specialist Antoni Trenchev.
According to Trenchev, “cheap money is here to stay, which has huge implications for crypto assets,” as “the Fed doesn’t have the stomach or backbone to withstand a 10% to 20% stock market collapse.”
Trenchev expects volatility in 2022 but predicts Bitcoin will hit $100,000 by the end of June. He added that the Metaverse is an exciting novelty, and that “the birth and use of the term metaverse is a beautiful mess and there is a lot of potentials. It will be one of next year’s overarching themes: the metaverse, building infrastructure, and then the NFTs that will be part of that economy.”
Taking a Closer Look at Pessimism – What Do Skeptics Have to Say?
According to Jeffrey Halley, Senior Market Analyst at Oanda Asia Pacific, 2022 will not be a year of “sunshine and rainbows” for Bitcoin.
Halley states that “although I expect crypto speculation to continue, the environment will be much more challenging in 2022, as was the case with stretched tech asset values.”
He adds that “the threat of more regulation looms over the crypto world, and frankly, with a new coin that is ‘the next big thing’ coming out every week and driven by speculation rather than blockchain, I have a hard time understanding how any one of them will get it.”
In this way, Halley says he continues to believe that cryptocurrencies are a perfect case study of the “herd effect” within the financial market.
At the beginning of 2021, Bitcoin price rose 120% and reached close to $64,000 on April 13, breaking records hitherto unimaginable for the coin. Less than two weeks later, it had plummeted to $49,000.
The Chinese government’s heavy regulation against the coin’s mining system weighed negatively against the world’s most famous crypto. In this context, Bitcoin’s struggle was real throughout the year, following an everlasting cycle of stagnation and exponentiation.