what to expect from the cryptocurrency market in 2022

 what to expect from the cryptocurrency market in 2022

Although the value of the main cryptocurrency declined by the end of last year, 2021 was generally successful for the crypto market. During this time, bitcoin has grown by 64%. At the same time, in November, it set a historic high of $ 69,000, and the capitalization of the entire sector crossed the $ 2 trillion mark for the first time. But does this mean that digital assets this year will continue to rise in price compared to fiat money? Lawyer Denis Chernyshov, founder and CEO of Eternity Law International, tells Mind what kind of dynamics to expect from the crypto market next year.

The capitalization of cryptocurrencies has been growing exponentially in recent years, and this is due to several factors. Many experts say the instability is, in particular, that the market is approaching decline and bitcoin will fall to $ 10,000 this year. This forecast is based on the fact that coins have no fundamental value. However, fans of cryptocurrencies believe that the situation will be completely different, expecting growth - at least $ 100,000 per 1 bitcoin.

What factors affect the 2022 bitcoin exchange rate?

Cryptocurrency is a promising way to earn money, being an ideal tool for accumulation, financing, and investing. Its fundamental value is formed by the equipment and electricity needed for production.

Another significant factor in growth is the regulation of the crypto market in several countries, which helps to clean the area from fraud and protect the interests of its participants. In this regard, in 2021, large institutional players with larger investments came to the market, they are aimed at long-term accumulation of digital assets.

These factors indicate that with the arrival of even more institutions, cryptocurrency volatility will decrease, and the scenario of bitcoin falling to $ 10,000 is very unlikely. But it should be borne in mind that the market for virtual assets still depends on the rapid development of new technologies, changes in regulations and policies in the traditional financial sphere, as well as the influence of major players.

How does global inflation affect the crypt?

In its 13 years of existence, bitcoin has not only been a protection against inflation but also ahead of all stocks in the S & P500 index. Its popularity is largely due to the desire of investors to protect themselves from record inflation. Todd Lowenstein, a strategist at Union Bank, predicts that the Fed's move to tighter monetary policy in 2022 will slow inflation and reduce liquidity, which could significantly reduce the attractiveness of the digital currency.

However, other experts believe that this aspect can not reduce the popularity and popularization of cryptocurrency, because digital assets are not inherent in such a concept as inflation.

The price of cryptocurrencies is shaped by other factors, such as decentralization and the number of people involved in coin mining and trading. Some companies use only cryptocurrencies as their work, making a profit like bitcoin, Ethereum, or other altcoins, thus shaping the value of cryptocurrencies.

How do political events and news background affect?

Due to the ban on the issuance and trade of cryptocurrency in China, a large amount of equipment has been moved to Kazakhstan, and now it also does not work there. Experts consider this a temporary effect and predict a change in the situation in the coming months. The equipment can be moved to other countries where there are appropriate conditions for digital asset mining.

Amid protests in Kazakhstan, where 18% of the world's mining capacity is located, the value of bitcoin has fallen sharply. This is an important parameter because the price of cryptocurrency is at the expense of equipment and electricity, and given the low electricity tariffs and lack of regulation in this country, there is currently a lot of mining equipment.

How will the emergence of a stock exchange bitcoin fund be?

The crypto community's most anticipated events in 2022 include the entry into the US stock market of the first physical bitcoin ETF. The US Stock and Securities and Exchange Commission has already approved the Bitcoin Strategy ETF from ProShare. It is worth noting that this fund is tied to futures contracts for bitcoin, not cryptocurrency.

The use of this tool has a positive effect on the cryptocurrency market: only for the first day of trading, the asset has already traded about $ 984 million. Thus, some assets have grown. But it cannot be said that it is bitcoin trading because it is futures trading that determines the price of a crypto asset in the future.

The fund allowed institutionalists to invest in bitcoin. Previously, they did not have this opportunity because investment funds must operate under the licensing regime of countries. So, in the coming years, even more, money is expected to be poured into cryptocurrency, because it is very profitable.

Will bitcoin lose its market leadership?

Increasing the popularity and exchange rate of other promising coins may lead to the fact that bitcoin will lose market share to other cryptocurrencies. But still, he continues to dictate the trend line, because this is the first cryptocurrency to appear, and it is exhaustive (a total of 21 million coins can be mined).

However, trading new tokens can be tens or hundreds of times more profitable than bitcoin. But in addition to potential profits, such investments carry more risk.

How is the legal regulation of the cryptocurrency sphere developing?

As market capitalization increases, virtual assets are attracting more and more attention from regulators. In the United States, for example, the Securities and Exchange Commission has not allowed several transactions, marking them as requiring a license. The Chinese government has taken a hard line on cryptocurrency, banning not only it's trading but also its extraction, which has led to the relocation of miners and the fall in the bitcoin exchange rate. Analysts expect regulation to be a key issue for the crypto industry in 2022.

In Ukraine, the Verkhovna Rada last year passed the law "On Virtual Assets". It is currently being finalized. The new law introduces cryptocurrency into the legal field, which will allow market participants to open accounts for cryptocurrency transactions.

Cryptocurrency companies will also be able to officially operate in Ukraine. They will be required to register and report regularly to the regulator. Previously, Ukrainian citizens could open such companies only in countries with appropriate regulations - for example, in Lithuania, Malta, Switzerland, Gibraltar, or others.

Brief results and prospects

Last year was very interesting for the crypto community: despite fluctuations, in 2021 the world's main cryptocurrency rose by 64%, Ethereum grew sevenfold. Ilona Mask's favorite cryptocurrency, Dogecoin, rose 103% in three days and Avalanche 29 times. In general, last year the crypto market had the opportunity to earn very well, but it was also possible to lose a lot. 2022 promises to be no less interesting.