This article was written exclusively for Investing.com
- 2021 was another bullish year for Bitcoin.Ethereum is even better
- Ugly start in 2022
- Reason 1: Rising inflation
- Reason 2: Decreased confidence in fiat currencies
- Reason 3: Cryptographic class acceptance is expanding
There is nothing to inspire a bull market like incredible performance with an unimaginable story of wealth creation for early investors. In my life, I have never seen an asset as profitable as the people who first boarded and held up.
Cryptocurrencies rose from 5 cents in 2010 to about $ 70,000 per token in 2021. The increase in percentage is very large and its magnetic force is strong.
Bitcoin’s success has created, which has also brought incredible wealth to early investors. As of January 9, more than 16,540 additional cryptocurrencies strive to capture attractive demand from stamping investors looking to find the next token to offer Bitcoin-like returns. doing.
Towards 2022, Bitcoin and Ethereum are entering a year of increasing the wealth of investors holding tokens. Three things could push Bitcoin, Ethereum, and many other cryptocurrencies to even higher highs next year.
However, risk is always a function of potential rewards, and the road to wealth can run into some obstacles after 2022. We expect a lot of volatility in the crypto asset class and invest only the capital we can afford to lose.
2021 was another bullish year for Bitcoin.Ethereum is even better
Bitcoin soared 57.81% in 2021, while Ethereum soared + 391.75%. On November 10th, both major cryptocurrencies moved to record highs when modified with a bearish key inversion pattern on the daily chart.
Volatility is nothing new to cryptography. They routinely experience the movement of rotating their heads up and down.
Source: CQG
The chart above shows that nearby traded from a low of $ 28,440 to a high of $ 69,355 in 2021. The closing price of $ 47,175 on December 31 was below the median of the year.
Source: Bar graph
The range for Ethereum in 2021 ranged from $ 716.919 to $ 4,865.426. The price on December 31st was $ 3,688.877, well above the midpoint of the year.
However, since the highs on January 9th and November 10th, 2022, this trend has been bearish, with Bitcoin and Ethereum falling below the prices at which digital currencies ended at the end of 2021 and selling in early 2022. Is continuing.
Ugly start in 2022
January Bitcoin futures settled at the $ 46,275 level on December 31, and continued to sell in the first week of 2022.
Source: CQG
The chart shows that nearby Bitcoin futures were below $ 41,800 per token on Sunday, January 9th. In 2022, it has fallen by more than 9.7% so far.
Source: CQG
January closed 2021 at the $ 3,685 level. At $ 3,198 on January 9, it was 13.2% lower, below Bitcoin and significantly lower since the first week of the new year.
Bitcoin and Ethereum were already on the decline when the Federal Reserve announced December on January 5th.
On the other hand, three factors suggest that Bitcoin, Ethereum, and other cryptos have bottomed out and will resume their rise in 2022.
Reason 1: Rising inflation
Actions are more eloquent than words while the Fed makes tough statements. In December, the FOMC predicts that the federal funds rate will rise to 0.90% in 2022 and 1.60% in 2023. Even as inflation recedes, real interest rates will remain in the low-inflationary negative territory in 2022.
If cryptos are inflation barometers, they move upwards, leaving a clear and present danger and potentially attracting new buys in a rising environment. Inflation reduces the purchasing power of fiat currencies. Cryptography is an alternative, as values are determined by buyers and sellers without government intervention.
Reason 2: Decreased confidence in fiat currencies
Fiat currency derives its value from the sufficient trust and credit of the government that issues fiat currency. Liquidity tsunamis and exciting tsunamis since early 2020 have eroded government confidence and credibility.
Trust is important for currency value. Is on the rise, but reflects only the value of the US currency against the euro, yen, sterling, and a few statutory reserve currencies. Measuring currencies for markets of all asset classes shows that confidence is declining along with the value of fiat currencies.
Reason 3: Cryptographic class acceptance is expanding
More companies are accepting cryptocurrencies as a means of exchange every day. Cryptos reflects the evolution of the fintech revolution, where technology ultimately tackled payments and finance. Cryptography provides consumers with an alternative as confidence in governments and traditional banking institutions declines.
Square, a settlement company that changed its name to Block (NYSE 🙂 in late 2021, is led by Jack Dorsey, who founded Twitter (NYSE :), a separate business from the company. He left Twitter last year to focus on cryptocurrency initiatives in 2022.
In 2021, Mr. Dorsey once said that Bitcoin and cryptography were “Unite the world.. “
On the other hand, as it has become a more mainstream investment vehicle, more portfolios hold crypto investments. Increasing portfolio allocation brings new purchases to the asset class every day.
But the risk remains
The main risk is government regulation. As the asset class grows,Systemic riskWas created by cryptocurrency. However, the primary concern for the government is likely to be managing the money supply, which translates into electricity.
With Apple’s (NASDAQ 🙂 market capitalization surpassing the $ 3 trillion level for the first time in early 2022, the $ 1.965 trillion cryptocurrency market capitalization on January 9 was a significant “Systemic risk.. “
Nevertheless, the market capitalization of the digital currency asset class increased by 182.18% in 2021 to the level of $ 2.166 trillion. A similar move in 2022 warned regulators and government officials that the value of the entire asset class was close to $ 4 trillion.
Ethereum Bitcoin is faster and more efficient, because Ethereum 2.0 is less energy intensive in the world dealing with climate change. It works under the proof of stake rather than the proof of work protocol, making it more efficient than a cousin with a larger cap. “
Nonetheless, I have resumed the rise that has generated enormous wealth for more and more followers of the fast-growing crypto asset class since Bitcoin and Ethereum have established higher lows over the coming weeks and months. I’m hoping to do it.
