Bitcoin, volatile crypto market facing uncertain 2022 after record year

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Salvdoran President Nayib Bukele’s decision to make bitcoin legal tender has helped propel cryptocurrency to new heights in 2021. AFP

The price of bitcoin hit record highs in 2021 thanks to support from mainstream finance, but cryptocurrency scholars are struggling to predict the 2022 outcome for the volatile sector.

Having more than tripled in value to $ 60,000 between December 2020 and April, bitcoin has lost its luster to trade below $ 50,000 as the new year approaches.

“The current choppy and directionless price action with the possibility of further downward pressure has introduced a lot of uncertainty into the digital asset market,” noted Loukas Lagoudis, executive director of the cryptocurrency investment fund. ARK36.

He added, however, that “the continued adoption of digital assets by institutional investors and their further integration into existing financial systems will be the main drivers of the growth of the crypto space” during 2022.

Bitcoin’s rise in 2021 coincided with Wall Street’s growing appetite for cryptocurrency.

April’s record came with the stock exchange debut of the Coinbase cryptocurrency exchange.

The October spike above $ 66,000 followed the launch of a bitcoin futures exchange-traded fund (ETF), or type of financial instrument, on the New York Stock Exchange.

Tesla boss Elon Musk has helped the market rise – and fall – with controversial cryptocurrency tweets.

El Salvador’s decision in September to make bitcoin legal tender also made a big impression.

But the pressure has come from China’s crackdown on cryptocurrency trading and mining, while the risk of broader regulatory action, from Europe and the United States, hangs over. bitcoin.

“There is no certainty when it comes to crypto no matter what the regulations are,” said Huong Hauduc, general counsel for Bequant digital asset exchange.

“However, one thing is certain, voices calling for crypto regulation, whether for tighter consumer protection or simply for clarity of the rules for institutions, are getting much louder.”

Created in the wake of the 2008 global financial crisis, bitcoin initially promoted a libertarian ideal and aspired to overthrow traditional monetary and financial institutions such as central banks.

More recently, climate change observers have shined the spotlight on the enormous amount of electricity used to power the computers needed to discover new bitcoin tokens.

Bitcoin is at risk of increased competition upon entry in 2022, some analysts say, especially from its closest rival Ethereum.

In November, Twitter co-founder and CEO Jack Dorsey announced his departure from the social media platform, leaving him to focus on his digital payments business as it seeks to expand into cryptocurrency.

For now, bitcoin remains the dominant player.

According to the specialist site CoinGecko, the cryptocurrency industry has a market value totaling $ 2.36 trillion, with bitcoin having a combined value of $ 900 billion.

For analyst Frank Downing, “bitcoin’s reluctance to change its design” from Ethereum, is in fact “a feature that provides the stability and consistency needed to serve as a true global currency.”

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