Crypto Predictions: What’s Next for the $2 Trillion Market? Photo: Have a nice day photo / Shutterstock.com
Cryptocurrency markets have lived up to their reputation for volatility over the past year, bouncing to all-time highs multiple times during the 2021 bull run and then beating expectations with a crash in early 2022.
Bitcoin (BTC/USD), still the leading cryptocurrency by market cap, peaked above $68,700 in November 2021 but then collapsed to $33,000 in January and has struggled to stay above $40,000 for an extended period since – keep brand.
As the dominant cryptocurrency, Bitcoin continues to drive sentiment toward the alternative cryptocurrencies known as “altcoins.” With bitcoin in its maturity stage, many investors are wondering what the next cryptocurrency that will explode in 2022 will be. In this article, we look at the key drivers of the industry and future predictions for cryptocurrencies.
Will the crypto market rise? trends to watch
The number of cryptocurrencies has grown exponentially in recent years as adoption has increased and blockchain developers have brought new applications to the market.
The emergence of decentralized finance (DeFi) has sparked interest in blockchain-based financial services that use cryptocurrency tokens to facilitate transactions.
The amount of total value locked (TVL) in DeFi services on blockchains increased from less than $19 billion at the end of 2020 to $237 billion at the end of 2021, data from DeFi Llama shows.
DeFi allows users to trade cryptocurrencies on decentralized exchanges, earn high interest rates by staking and yield farming their tokens, borrow against their crypto holdings at low interest rates, and trade tokenized assets like stocks.
Tokenization has become increasingly popular with the explosion of non-fungible tokens (NFTs). The first NFTs were created in 2017 to be used as characters in blockchain-based games.
NFTs are becoming increasingly important in the art world to sell digital works to buyers worldwide. Artist Beeple sold an NFT artwork for $69 million in March 2021 and digital artist Pak sold an NFT collection called The Merge to over 28,000 in December 2021 for a total of $91.8 million.
NFT profile picture (pfp) collections such as Crypto Punks, Bored Ape Yacht Club, and Cool Cats are considered “blue chip” projects, much like blue chip stocks are most likely to fall in value over time with less risk.
Buyers use their pfps on social media to show their support for the projects. Collections like World of Women (WOW) and Boss Babe aim to use this to raise funds for real-world projects that support social programs.
Similar to crypto prices, NFT prices are highly volatile and carry the risk that the hype surrounding certain projects will quickly die down and investors may have lost an asset that has lost value.
Daily NFT sales volume peaked at $338 million in August 2021 but fell to $40 million the following month, data from DeFi Llama shows. Daily volume peaked at $232 million in February but was down to just $354,000 on April 12.
NFTs are central to the play-to-earn and move-to-earn models in blockchain gaming, which gained momentum in 2021 with the popularity of games like Axie Infinity (AXS/USD).
Axie Infinity, in which players breed and battle NFT characters in a metaverse, has developed an in-game economy that allows players in countries like the Philippines to earn enough cryptocurrency to generate real-world income.
The popularity of the play-to-earn model has fueled the development of move-to-earn applications where users don’t have to spend time playing online games, but instead upload data from cell phones or fitness trackers to earn rewards for themselves to earn activity in the real world, like walking or playing sports.
Cryptocurrencies associated with NFT games and Metaverse applications have seen extreme price volatility, with Axie Infinity currency AXS surging from $0.59 in early 2021 to a high of $160 in November 2021 and then in March dropped to the $45 level in 2022.
Metaverse applications are a key driver of cryptocurrency expectations in the long-term as they will play an integral role in the development of the third generation Internet (Web3). US investment bank Fidelity has launched an Exchange Traded Fund (ETF) to give investors exposure to companies in the industry.
November’s surge in cryptocurrency prices was led by Metaverse tokens after Facebook’s parent company changed its name to Meta Platforms to indicate the direction of its future development.
Crypto Predictions 2022: Factors at play
While analysts are largely bullish on the long-term trajectory of the cryptocurrency industry, the near-term outlook is more uncertain. What will define crypto in 2022: an ongoing bear market or will prices surge later in the year?
“With broader market risk sentiment and global uncertainties arguably having a major impact on the crypto market of late, these themes should reasonably be a priority for investors considering short-term movements in the crypto market,” said Mads Eberhardt, cryptocurrency analyst at Dutch Bank Saxo in a March note.
Arthur Hayes, co-founder of the BitMEX exchange, expressed pessimism about the near-term cryptocurrency market outlook.
“The inconvenient truth plaguing crypto right now is that crypto is moving in lockstep with the debt-based, unfree markets for risky assets like global developed-market equities,” he wrote in a blog post published April 11.
While forecasting cryptocurrency prices, Hayes expected BTC to test $30,000 and ETH to test $2,500 by the end of Q2.
“The annoying part is that there are a number of altcoins that I have accumulated because the prices are quite attractive,” Heys wrote.
“Even though some of these coins are already 75% below their all-time highs, I don’t think they too can escape the coming crypto carnage. Therefore, I buy Crash June 2022 for both Bitcoin and Ether,” he added.
Crypto Prediction: Bulls vs. Bears
A look at the top 3 cryptocurrencies by market cap can give an indication of the direction of the overall markets, as smaller altcoin prices are heavily influenced by the largest coins.
Bitcoin (BTC/USD) leads the market with a total value of around $780 billion at the time of writing (April 14), followed by Ether (ETH/USD) at $371.2 billion and Tether (USDT /USD) at $82.7 billion to CoinMarketCap. The total crypto market cap was around $1.9 billion, below the all-time high of $2.9 billion during the November rally.
In their February outlook, Bloomberg analysts wrote that the market could bottom at $30,000, with $100,000 being “the next major bitcoin breakpoint.”
The report revealed bullish sentiment in its crypto forecasts despite the recent price drop, stating that “some purging of 2021’s speculative excesses may mark much of 2022, but Bitcoin is poised to come out on top.”
“Early adoption days and a limited supply of the nascent technology/assets are key drivers of price appreciation for the benchmark crypto that is on track to become a global digital security,” the report reads.
“The proliferation of crypto-dollars is indicative of the increasing dominance of digital assets, with bullish implications for the greenback, bitcoin and Ethereum… Ethereum is the primary platform for crypto-dollars and non-fungible tokens (NFTs) and a key support for the price of ether,” it added.
However, US investment management company Invesco has been bearish in its assessment of the cryptocurrency markets.
“The mass marketing of bitcoin reminds us of the activities of stockbrokers leading up to the 1929 crash,” Paul Jackson, global head of asset allocation research, wrote in January.
“We know how this ended, and Bitcoin has already dropped to around $42,000 (as of Jan 7, 2022), following the downtrend of our mania template exactly. This template suggests a 45% loss in the 12 months following the peak of a typical financial mania.
“If this pattern is followed (assuming we’ve seen the top), the price of bitcoin would fall to $34,000-$37,000 by the end of October…we think it’s not too far-fetched to imagine that bitcoin this year will drop below $30,000. ”
When looking at a crypto forecast, it’s important to remember that prices are extremely volatile, making it difficult to make accurate predictions in the short-term and even more difficult to provide long-term estimates.
If you are considering investing in cryptocurrency tokens, we recommend that you always do your own research. View the latest market trends, news, technical and fundamental analysis and expert opinion before making an investment decision. Remember that past performance is no guarantee of future returns.
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