Financial research firm FS Insights predicts in a new report that Bitcoin could reach $222,000 and Ethereum could reach $12,000 by the end of 2022.
At the current prices of BTC ($43,350) and ETH ($3,080), this means that the prices of BTC and ETH will increase by nearly 5 times and 4 times, respectively.
The report The Digital Assets In A Post-Cycle World explains several factors that could drive prices to this level by the end of the year. Compared to other cycles, Bitcoin appears to be falling short of what the report calls "overly frothy valuations." This could be attributed to increased market efficiencies, or a shift from payment solutions to stores of value.
The fact that BTC’s market capitalization peaked at a mere 3.7x increase since the Bitcoin halving in May 2020 suggests that Bitcoin’s price doesn’t look like a bubble. This is the lowest increase since the 2016 halving, when the market capitalization peaked with a 4.2x increase.
A halving is when the mining reward for each block is cut in half, reducing the new supply entering the market. During the 2020 halving, the reward dropped to 6.25 BTC per block.
FSInsight also sees supply-side dynamics as a bullish signal. The illiquid supply of BTC — bitcoins in long-term storage — is about 75% of the circulating supply. The report states:
"The current supply dynamics can be described as a powder keg. The question is who will light the match."
This observation fits perfectly with a video posted on February 7 by the Youtube channel InvestAnswers. Host James Mullarney said that "buying 100,000 to 200,000 bitcoins in one to two weeks" could push the price up threefold due to the current lack of sellers.
FSInsight’s report also noted that BTC’s Market Value to Realized Value Ratio (MVRV) is at its lowest level since April 2020, when the price was still below $10,000. Since then, the bitcoin price has climbed steadily over the next year, reaching a high of around $57,000 in May 2021.
Ultimately, the report predicts that by the end of 2022, the price of Bitcoin will reach a range of $138,000 to $222,000.
The case of ETH
The bullish predictions for ETH started with how Ethereum generated nearly $10 billion in fees in 2021. Since 2020, the annual growth rate has been 1,564%, the report said.
ETH supply-side dynamics also provided bullish signals for analysts, who noted that the post-implementation burn mechanism of EIP 1559 created “deflationary pressures,” but added:
"While we don't necessarily think this makes ETH a 'sound' currency, it's certainly good for the price."
FSInsight analysts concluded that ETH is "significantly undervalued." Factoring in The Merge—Ethereum’s planned transition to proof-of-stake consensus, second-layer platform development and the potential launch of an exchange-traded fund (ETF)—the analyst expects the price of ETH to fall by the end of 2022. to $12,000.
Cointelegraph Chinese is a blockchain news information platform, and the information provided only represents the author's personal opinion, has nothing to do with the position of the Cointelegraph Chinese platform, and does not constitute any investment and financial advice. Readers are requested to establish correct currency concepts and investment concepts, and earnestly raise risk awareness.
Sanya
