Crypto and equities remain under pressure from the Federal Reserve’s hawkish axis. 3 crypto traders and analysts explain why Bitcoin (BTC) may drop as low as $30,000 in the near term before continuing its bullish stride, and share 4 altcoin projects that are on their radar in 2022. We, as Kriptokoin.com, have prepared the shares of the analysts for our readers.
Fed expectations also affect Bitcoin and altcoin prices
Bitcoin and Ethereum are trading in similar ranges to last year’s price levels, but investor sentiment in the crypto market looks different this time around. The enthusiasm over Bitcoin’s rapid rise from $20,000 in December 2020 to $40,000 in January 2021 has been replaced by worry about whether the leading crypto peaked at $69,000 in November.
Fueled by expansionary monetary policies and massive fiscal stimulus since the start of the Covid-19 pandemic, financial markets are facing three or four rate hikes this year as the Federal Reserve prepares to slash its $8 trillion bond portfolio. With US inflation at its highest level in nearly four decades, some economists and strategists are projecting up to five or seven rate hikes in 2022. Joel Kruger, market strategist at LMAX Group, said in an interview:
We are in a market environment where cryptocurrencies are very connected to the fundamentals in the traditional financial market space. This is what dominates the price action right now.
As risk appetite in general decreased, traders positioned accordingly. According to CoinDesk, Bitcoin’s risk reversals that calculate price differences between sells and buys have turned positive, signaling increased demand among investors for hedges against possible downward price movements. Meanwhile, Bitcoin’s perpetual open interest across all exchanges has also risen to a historically high 250,000 BTC, leading to ‘major pivots in price action’ since April 2021, according to a Glassnode research note on Monday.
Bitcoin could drop to around $30,000 in the near term
According to Armando Aguilar, an independent crypto analyst and former Fundstrat digital strategist, for those watching the technical details, Bitcoin could drop as low as $30,000 in the near term before continuing its uptrend. The analyst states that the relative strength index, which indicates whether an asset is overbought or oversold, has hit the bottom for Bitcoin, but has not yet reached the oversold level. According to the analyst, Bitcoin’s moving averages are looking for a break higher to resume the positive momentum. Armando Aguilar predicts:
If we fail to keep this momentum on the basis of RSI and MACD, we may see more recent declines. It wouldn’t surprise me to see all these indicators kick in and kick off another big sell-off that could potentially lead Bitcoin down to $30,000.
With notable speed bumps ahead, Joel Kruger predicts Bitcoin will slide to the downside in the coming weeks, but remains bullish in the medium to long term:
Talking about Bitcoin and Ethereum price, we have to take into account that these cryptos are extremely well supported for the next big breakouts towards $100,000 and $10,000 respectively. I think it’s very likely that we’ll see some movement by the end of the year.
Meanwhile, Aguilar recommends that investors reduce their exposure to volatile price movements by allocating some of their assets to stablecoin-based yield products until the market rebounds.
Altcoin projects, NFTs and DeFi
Bitcoin’s high price frightens many individual traders. This not only destroyed Bitcoin’s dominance in crypto, but also led to the exponential rise of altcoin projects in 2021. So far this year, investors have even turned to smaller-cap altcoin projects that didn’t increase a hundredfold last year. The two altcoins currently on Armando Aguilar’s radar are Near Protocol (NEAR) and Fantom (FTM).
Altcoins aside, it’s the big trends that get institutional investors like Paul Eisma excited. The head of commerce at crypto finance firm XBTO has been keeping a close eye on Non Fungible Tokens (NFTs) and decentralized finance (DeFi) this year. NFTs have been a bright spot among crypto market whips. According to Arcane Research, the largest NFT market OpenSea bought over $2 billion in Ethereum in the first two weeks of January.
Amid the rise of NFTs, DeFi has quietly increased its total value from over $18 billion in January 2021 to $239 billion at the end of last year, according to DeFi Llama. Paul Eisma is positive about the growth of NFTs and DeFi because they represent the gateways to engaging a significant number of users in crypto. Paul Eisma says in an interview:
DeFi will be huge in 2022 and NFTs won’t go away. People who are not crypto-related simply do not know what the underlying basis is.