Bitcoin’s rally in 2021 marked an impressive achievement for crypto, favoring mass adoption and the investing FOMO (Fear of Missing Out) of institutions across the globe. However, upward volatility comes at a cost: an equal, potential push towards the bottom.
Not surprisingly, then, when November’s all-time high of nearly $68.000 couldn’t find adequate support, Bitcoin’s price (and the majority of the market) started to crash.
As experts and analysts imagine the future of web 3.0 for insights and predictive clues, the biggest question remains: Is the crypto bull run over? Or is there still enough fuel for a new peak in 2022?
While bulls and bears fight for dominance, in this article, we will analyze the top factors determining the outcome of this complex equation.
Read on to find out what’s in store for the future of the crypto market!
Bullish Factors:
Bitcoin Fundamentals
While volatility in the short term is unavoidable in a new asset class, if one believes in Bitcoin’s fundamentals, one must assume that the value of BTC will only increase in the long run.
This is because Bitcoin is appreciated for its scarcity (many today refer to it as “digital gold”) and for the relative difficulty involved with its mining. Furthermore, as we move closer to 2024, the shadow of the new halving (when BTC rewards for miners will be reduced by half) will loom and likely influence the price of this asset.
Will this be enough to propel the market upwards in 2022? Probably not by itself, but there are additional bullish factors to consider.
Mass Adoption
For instance, crypto has never been as trendy and mainstream as in 2021. This is not only true for the public and the general positive sentiment (back in 2013, Bitcoin was seen as a scam by the majority of people), but also for the role played by institutional investors.
You’ve probably heard of Tesla accepting BTC for payments, El Salvador adopting the king of crypto as legal tender, or Facebook rebranding as Meta in the attempt to take over web 3.0. Or what about the epic Crypto.com ad with Matt Damon (“Fortune Favors the Brave”), or the renaming of the Staples Center (LA Lakers’ stadium) as the Crypto.com Arena?
These events are critical for the outcome of the current bull run, because they signal that crypto is gradually morphing from “new asset class” to established investment material. If this is true, we might not see a harsh crypto winter as we did in 2013 and 2017 (with dreadful crashes exceeding 80%), but possibly a steady growth leading to 2024.
That means that 2022 could bring a new all-time high and a continuation of the bull market.
Stock-to-Flow (S2F) Model
This model (created by blockchain expert and former investor known as PlanB) tries to predict Bitcoin’s price by treating it as a store of value of the likes of gold or silver.
While it doesn’t claim absolute precision, the model is meant to be observed as an average range of values that the asset can acquire over time.
According to its chart, the price of BTC is likely to exceed $100k in early 2022 and approach $1M in 2025. Thus, the current dip in the market should be seen merely as a minor deviation from the average—what PlanB in a recent tweet called a “buy signal.”
Now, are we suggesting you daringly invest in crypto right now? Not at all: you should always do your own diligent research and carefully formulate your strategy. But if the prediction is correct, the bull market might not be over just yet, and explosive times might be just around the corner in 2022.
The only issue is that the SF2 model doesn’t take into account very relevant factors when it comes to Bitcoin price, namely the ever-looming threat of short-term volatility and the occurrence of Black Swan events…
Bearish Factors:
Short-Term Volatility and Black Swan Events
We have already mentioned how volatility can be a quintessential feature of crypto assets in general, and how only time and widespread adoption will counter this trend.
So, until web 3.0 becomes the norm and every single grandma in your neighborhood starts buying crypto, expect a great rollercoaster of price movements.
Furthermore, the introduction of crypto leverage trading during the 2017 bull market added a new layer of uncertainty, as greedy traders (sometimes employing 10x, 20x, or even greater leverage) can be quickly liquidated even with minimal price fluctuations, driving BTC’s value down abruptly and with no apparent reason.
The major threat to the crypto market, however, is what business experts often refer to as a Black Swan event—i.e. unforeseeable, one-of-a-kind occurrences such as natural catastrophes or regulatory crackdowns.
The onset of COVID-19 in March 2020 (in this case) would be a perfect example, as the unprecedented news was followed by a flash crash in both the stock and crypto market. Another instance would be China’s crypto crackdown in 2017 (which coincided with the end of that bull run) or the SEC accusing Ripple Labs of selling unregistered securities for $1.3 billion (which caused a drastic devaluation of XRP in December 2020).
Whatever the case, Black Swans are the #1 threat to crypto, and their unpredictability (combined with the market’s unique volatility) can deal unspeakable blows to Bitcoin’s price. The good news is that, after the last crash in November 2021, the market appears to have found new stability, and signals like the ones identified by PlanB foretell an upcoming rally towards the sky. Volatility will be a short-term obstacle, but alone it won’t be able to stop the bulls. Unless a Black Swan comes to ruin the party, we might see crazy things in 2022.
