While bitcoin hit highs in late 2020 and early 2021, 2022 remains more than a little uncertain for the cryptocurrency. Analysts struggle to know how bitcoin will perform as more and more voices call for more regulation.
It’s been snapped up on Wall Street, attracted the interest of big names in finance, adopted as the official currency by El Salvador… The year 2021 was a record year for bitcoin. But what about 2022? Bitcoin has seen its price boosted this year by traditional finance’s appetite for this new type of investment, but cryptocurrency experts are struggling to predict how this volatile sector will perform in 2022. After a string of record highs in late 2020 and earlier this year, bitcoin seems to have lost some of its luster: between December and April, the cryptocurrency was stringing together all-time highs, going from under $20,000 to over $60,000.
A supercharged performance, fueled by the interest of big names in new technologies and finance, who had previously stayed away from this technology that has only existed since 2008. But since then, and despite a new record in October, bitcoin has continued to soar with equally spectacular plunges, and at the end of December was trading at less than 50,000 dollars.
“The choppy and directionless price performance, which could result in a further decline in the short term, makes the market very uncertain,” admits Loukas Lagoudis of cryptocurrency investment fund ARK36. But “we expect the adoption of digital assets by institutional investors and their integration into the traditional financial system to further push the crypto market next year,” he wants to believe.
The regulator is watching
Indeed, that’s what has boosted the price of bitcoin since late 2020: cryptocurrency-related announcements have multiplied over the months, from the big names in traditional finance to those in new technologies. While El Salvador’s adoption of bitcoin as an official currency has made a mark, investors have focused on Wall Street’s appetite for the crypto-currency.
Bitcoin’s April high coincided with the IPO of cryptocurrency trading and buying platform Coinbase, and the October high with the regulator’s approval of bitcoin-related index products. In both cases, cryptocurrency enthusiasts are approving what they see as signs that the market is softening. The risk of regulator action does weigh on the cryptocurrency, which was created in the wake of the financial crisis to avoid dependence on central banks – and whose sky-high power consumption is often criticized.
Less pronounced dominance
For now, criticism of bitcoin isn’t stopping some of the world’s richest men from taking an interest. Tesla boss Elon Musk has been steadily moving the market, including announcing that he has invested some of his group’s cash in bitcoin. More drastically, Jack Dorsey left the leadership of Twitter to focus on his digital payments company, Square, which he renamed Block and where he plans to expand his cryptocurrency business.
But bitcoin is also facing competition from other cryptocurrencies. According to the specialized site CoinGecko, which lists more than 12,000 cryptocurrencies, the market is worth $2.36 trillion, with more than $900 billion in bitcoin alone. Its share has declined over the year, and as No. 2 ethereum prepares to try to evolve its model, some wonder if the decentralization that makes it virtually impossible for bitcoin to evolve will cause its demise. “Bitcoin’s reluctance to change its model is, in our view, one of the characteristics that makes it stable and consistent, which is necessary for a real global currency,” replies Frank Downing, an analyst at ARK, however