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This year, we saw Bitcoin plummet after its all-time high of over $19,000. This also saw the global cryptocurrency market drop drastically, just at a moment when many expected a 1 Trillion market cap. This has caused a lot of uncertainty and doubts as to what direction we can expect from the coin and the entire cryptocurrency market. As investing in cryptocurrency is been talked about increasingly these days, here are a few factors that will determine the direction Bitcoin will take in 2022.
It is expected that at least one Bitcoin ETFs will be approved in 2022 after several rejections by the SEC. However, after this approval, many expect Bitcoin’s price to soar upon. In fact, according to a study by Tom Alford, an independent trader, and cryptocurrency expert, Bitcoin can be expected to soar over 500% after the ETFs are being approved.
Gold’s ETF for example after being approved in 2003 saw the asset take a bull run for the next 8 years growing over 478%. Such a potential growth in Bitcoin’s price can be attributed to the inflow of institutional investors investing in cryptocurrency. Currently, many institutional investors back away from cryptocurrencies because they most often link cryptocurrencies to crime or rather because to most of them it sounds like a grey area. This, therefore, doesn’t motivate most of them into investing in cryptocurrency.
ETF’s can, therefore, be seen as an endorsement of cryptocurrencies and this will definitely lead to “Big money” pouring into the industry.
The acceptance of Bitcoin and cryptocurrencies takes a positive note year after year. It is expected that in 2022, cryptocurrencies would reach even much more people with many first time investors who will eventually be investing in cryptocurrency. This also includes governments using the blockchain technology and more central banks testing and/or introducing their own digital currencies.
The IMF chief, Christine Lagarde for example, recently called on central banks to create their own digital currencies in order to remain relevant within the financial sector. It is worth noting that she has been a one time skeptic of cryptocurrencies.
This, therefore, means we can expect to see central banks start creating their own cryptocurrencies in 2022 or even investing in cryptocurrency related projects. Such a move will eventually lead to an increase in the acceptance of digital currencies and more people investing in cryptocurrency.
A new World Trade Organization report indicates that the international trade regulatory body sees very strong potential in the blockchain technology with Ripple being highlighted as an important disruptor. They also see several million pouring in from financial sectors into exploring the blockchain and also them investing in cryptocurrency.
Investing in cryptocurrency via Security Tokens
With the creation of the Ethereum blockchain, then came into play smart contract which gave rise to ICOs which raised billions in dollars last year alone. However, with a crackdown by the sec, we saw many ICO starting restricting their offerings from the US to avoid being scrutinized by the SEC.
It is important to note the importance the United States plays within the cryptocurrency industry from investing in cryptocurrency, the inflow of cash to their massive contribution in technology.
With a major player like the US being restricted from ICO participating, therefore, led to a hindrance to major developments which could have been achieved in the space. It is for this reason that security tokens will be a game changer within the industry as we expect them to be one of the biggest trends in 2022.
“The advent of security tokens in 2022 will be a big game changer, it will do to the traditional VC industry what email did to the post office,” Eric Kovalak, CEO and managing partner of Vellum Capital.
Security tokens will also bring in institutional investors investing in cryptocurrency and the industry in general as security tokens will lean a little towards how traditional investments operate.
Bakkt is a company that enables both private customers and institutions to buy, store and sell cryptocurrencies on a global platform. Bakkt aims to facilitate investing in cryptocurrency by providing a federally regulated market for Bitcoin with merchant applications. If you have been involved in cryptocurrencies for a long time, then you can testify the impact that positive announcements and developments have on its price.
Bakkt seems to be one of the most anticipated developments within the industry. In fact, due to the high interest and anticipation that surrounded this project, the company had to postpone their launch from December 2018 to January 2022 citing their desire to deliver a product that works well and makes it easy for investing in cryptocurrency.
“Given the volume of interest in Bakkt and work required to get all of the pieces in place, we will now be targeting January 24 2022, for our launch to ensure that our participants are ready to trade on Day 1,” CEO Kelly Loeffler, in a Medium article.
It is said that ICE (Intercontinental Exchange), the company behind Bakt and also the company behind Nasdaq, partnered with Boston Consulting Group, Microsoft and Starbucks for the creation of Bakt. With such big names backing this project, we can expect an influx of traditional investors investing in cryptocurrency next year.
However, investing in cryptocurrency might not see good returns in the early months of 2022. Investors have historically seen declines in price during these months.
In 2014, Bitcoin ended the year trading at around $817 and by April 2015, it was trading at around $421. Similarly, in December 2015, it was trading at $455 and by April 2016, it dropped to around $420. Fast forward to 2017, Bitcoin was trading above $15,000 and by April 2018, it was trading at around $9000.
As history holds it, Bitcoin price has always taken a slight deep in the first half of the year as traders cash out for the payment of their capital gains. Earlier this year, for example, it was estimated that the US households owed about $25 billion in capital gains from 2017 according to Thom Lee, head of research at Funstrat Global Advisors.
Many suggest cash outs for tax purposes have always had a minor impact on Bitcoin’s price, hence the decline we see at the start of the year. If history is to repeat itself, early 2022 cannot be expected to be the best months for cryptocurrencies in 2022.
Do you think this is the right time to consider investing in cryptocurrency? What other factors do you think might affect the price of Bitcoin?
Let us know your thoughts below.
Please always do further research before investing in cryptocurrency or any other asset.