What awaits the crypto industry in 2022? What will happen to Bitcoin? Analysts share their views. Some analysts think that crypto will see a massive drop in prices next year, but others disagree, saying the industry is well prepared for the upcoming challenges. Most analysts agree on tougher regulatory measures in the industry next year, especially for stablecoins.
What will happen with Bitcoin (BTC)?
This year, the crypto market has grown to over $2 trillion, up from $668 billion last year. Crypto king Bitcoin (BTC) has risen nearly 70 percent since the start of the year. Coinbase became the first crypto-related company to go public, and Wall Street players like Goldman Sachs have doubled down on crypto. Moreover, the US Securities and Exchange Commission (SEC) has approved the country’s first Bitcoin futures exchange-traded fund (ETF). But even in light of these and many other successes, the industry still faces strong headwinds. Several analysts believe that Bitcoin and its “brothers” are facing an imminent collapse in the coming months. Carol Alexander, a finance professor at the University of Sussex, expects Bitcoin to drop to $10,000 in 2022. He urges investors to “get out of Bitcoin soon”, saying that Bitcoin is a “toy” with “no fundamental value”.
BTC traded below $50,000, down 30 percent from its peak near $70,000 in November. A drop of 20 percent or more means a bear market, according to Wall Street analysts. However, BTC’s volatility could invalidate this. “Undoubtedly, Bitcoin’s price chart seems to follow many historical asset bubbles and collapses, and just like other bubbles it carries a ‘different’ narrative this time around,” said Union Bank’s Todd Lowenstein. Differently, Yuga Hasegawa of Japanese exchange Bitbank is confident that crypto will not die in 2022. The biggest risk factor, namely [quantitative contraction] by the Fed, was decided and probably priced in. Additionally, speculation is high that a Bitcoin spot ETF will be approved next year. Futures ETFs are more expensive and riskier, especially for novice investors. The US regulator is also under great pressure to approve such a proposal.
DeFi will see growth and tighter regulations next year
As for the decentralized finance (DeFi) sector, Alexander expects DeFi altcoin projects to surpass Bitcoin as they play a fundamental role. “By this time next year, I predict the market cap of Bitcoin will be half the combined limit of smart contract cryptocurrencies like Ethereum and Solana,” Alexander said, adding, “or even less.” Bryan Gross of ICHI crypto platform thinks DeFi and decentralized autonomous organizations (DAOs) in addition to Web3, will be “probably the highest growth areas in crypto.”
What most analysts have in common is the expectation of tougher regulations for the crypto industry next year. Vijay Ayyar of crypto exchange Luno expects regulators to clarify the “gray zone” of crypto securities and assets. Specifically, regulators are likely to focus more on stablecoins to avoid a crisis similar to the 2007-2010 housing and mortgage crisis. Todd Lowenstein from Union Bank said:
There will undoubtedly be more scrutiny on stablecoins as regulators look under the hood regarding the soundness of the underlying collateral and the amount of leverage applied.