2022 is off to a rocky start for bitcoin , with investors grappling with rising inflation, geopolitical tensions and fears that the Federal Reserve may tighten monetary policy. The cryptocurrency market has increasingly tracked the stock market in recent months, making it more intertwined with global economic factors.
BTC has been oscillating around $30,000 for the past week, with both traditional financial markets and cryptocurrencies struggling to regain momentum, with many pundits still saying it will hit $100,000 — it’s more a matter of when than if it will happen . But at the same time, some experts said that with no end in sight, multiple factors may continue to drive greater volatility in the coming weeks and months. In this context, predictions of the direction of encryption are increasingly polarized.
Volatility Lives
Amid the ups and downs this year, bitcoin's current price is a far cry from its most recent all-time high set last November, when it topped $68,000. But even with the recent price drop, bitcoin is still more than twice as valuable as it was a few years ago. Such ups and downs are nothing new for Bitcoin.
Volatility is nothing new, and it’s a big reason why experts say new crypto investors should be very cautious when allocating part of their portfolio to cryptocurrencies. Over the years, Bitcoin has grown in value as steadily as any other cryptocurrency on the market. Bitcoin investors are legitimately curious about how high it can eventually rise.
Unfortunately, Bitcoin's price is extremely unpredictable and even more susceptible to market factors than more established asset classes. But because of the volatility, people are still enjoying the related predictions.
In fact, at the end of last year, at the high stage of BTC, most of the market tended to predict the price of Bitcoin at $100,000. But back from its latest all-time high in November, the forecasting game has gotten trickier as bitcoin has fallen sharply since then. The most extreme cryptocurrency skeptics say Bitcoin will drop to as low as $10,000 in 2022, but the bulls may be saying the cryptocurrency can still climb to $100,000 as many pundits predicted late last year — just on a longer timeline. slow.
Downside risks still exist
Edward Moya, senior market analyst at foreign exchange brokerage Oanda, wrote in a market analysis memo on May 19: "As Wall Street suffered its worst loss in nearly two years, bitcoin was dragged down along with most risk assets. Bitcoin Still a risk asset.” If risk reduction continues, the asset is vulnerable to further pain. "
Bank of England Deputy Governor Jon Cunliffe issued a warning to cryptocurrency investors at a Wall Street Journal conference on Tuesday. Cunliffe warned that cryptocurrency investors should expect more difficult times ahead. He explained that as the Federal Reserve and central banks around the world tighten financial conditions, investors will prefer safer assets. In response to a question about whether rising interest rates will increase the pressure on cryptocurrencies, Cunliffe said: I think as this process continues, as (quantitative tightening) starts in the United States, I think we will see a transfer of risk assets.
In addition, former Goldman Sachs hedge fund manager and Real Vision CEO Raoul Pal said that a potential decline in the stock market could threaten the price trend of cryptocurrencies in the coming months. Pal said he was watching the Nasdaq and said that from a technical analysis point of view, if the index fails to hold a key support level, the index may continue to fall, and the stock market faces the risk of a sharp decline. The current macro picture suggests a major correction is coming, which could weigh on the digital asset, though not lead to new lows. He also said that if cryptocurrencies eventually enter a correction phase, he sees more noise in the overall market.
Long-term bulls stretch the front
Despite the volatility and recent price crash, many experts still say that Bitcoin is on its way to breaking the $100,000 mark, although opinions vary on when that will happen. A recent study by Deutsche Bank found that roughly a quarter of bitcoin investors believe the bitcoin price will surpass $110,000 within five years.
Another indicator in favor of the bulls is the presence of the mainstream. Big companies like Nike and other big brands are finding ways to monetize their products in the digital virtual world. The metaverse, NFT rise is increasing the popularity of altcoins, which is changing investors' perception of Bitcoin. Jurrien Timmer, global head of macro at Fidelity Investments, predicted last October that investors should expect a "pretty sustainable" rise in bitcoin's long-term value, fueled by organic market movements, with the $100,000 threshold imminent.
The bitcoin investor and founder of Token Metrics pointed out that bitcoin could rise to $100,000-$150,000, but the timeline is unclear. Because Bitcoin is in a bearish sentiment cycle, but the entire crypto market and other crypto asset classes are not. Bitcoin was the first cryptocurrency, but now others have surpassed it in innovations that experts are calling "Web 3"—that is, a new internet built on the blockchain. The launch of new altcoins and the hype surrounding the Metaverse will continue to drive demand for the cryptocurrency, so Bitcoin will eventually rebound.
Several large financial institutions have also made their own predictions, with JPMorgan predicting a long-term high of $146,000 and Bloomberg predicting that if the currency climbs at a pace comparable to the past, it could reach $400,000.
Multiple factors affect the price of BTC
Normal economic factors affect the price of a cryptocurrency just like any other currency or investment—supply and demand, public sentiment, news cycles, market events, scarcity, and more. We have covered the main factors affecting cryptocurrencies in our previous articles.
Trends are generally created by four main factors: governments, international transactions, speculation/anticipation, and supply and demand. These domains are all linked because expected future conditions shape current decisions, and current decisions shape current trends. Finally, changes in supply and demand create trends as market participants compete for the best price. (What are the main factors affecting the market outlook: https://www.jinse.com/blockchain/1510877.html)
So, as with any investment, financial planners and other experts advise against letting Bitcoin's price volatility lead you to make emotional decisions. Investors who regularly contribute to passive index funds and ETFs perform better over time, research shows, thanks to a strategy called dollar-cost averaging. That's why experts recommend never investing more than 5% of your overall portfolio in cryptocurrencies, and never investing at the expense of emergency savings and paying off high-interest debt. The path to long-term wealth and retirement savings is often successful for people with well-diversified investments such as low-cost index funds, and cryptocurrencies make up only a small fraction of that.
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