With the disaster that was 2021 behind us, investors now have their eyes set on what 2022 will hold for Bitcoin and the overall digital asset market. Despite major progress, there is still a certain level of uncertainty within the market. This has been made obvious by recent commentary as BTC struggles to decide whether to continue falling, or rise up once again.
A Look Back
To move forward, we must first look back upon 2021 to understand what Bitcoin has grown in to. Not only did major adoption begin to spill over from retail to institutional investors, a major narrative persisted – BTC will continue to supplant Gold as the favoured hedge against inflation. While Bitcoin is most definitely not as stable as Gold at this point in time, investors – especially younger generations – have not been dissuaded from the belief that this could change. With its fixed supply, growing demand, and transparent nature, Bitcoin has all the traits in place for this to occur.
This sentiment was recently highlighted by Jeremey Siegel, a Finance Professor at Wharton School PENN in an interview with CNBC. He states, “Bitcoin as an inflation hedge in the minds of many of the younger investors has replaced gold…Digital coins are the new gold for millennials.”
While younger generations may remain more open towards digital assets, progress in 2021 was not enough to sway the perceptions of many older generations. Another Professor of Finance, George Athanassakos from the University of Western Ontario, showed this in an article penned for The Globe and Mail. In it he notes the following as reasons for what he believes will ultimately lead to the demise of BTC.
- Incoming regulation
- Lack of correlation to markets (BTC can’t be used as a hedge)
- No physical use-cases
- Failure to act as a currency
It is clear when looking back at 2021 that much work still needs to be done. Yes, there was progress made, but many remain unconvinced of the future viability of Bitcoin and digital assets as a whole.
A Look Forward
So what does 2022 look like for digital assets? President of El Salvador, Nayib Bukele, tweeted his predictions.
While some of these predictions may seem overly optimistic, the vast majority of analysts also anticipate a positive year for digital assets. Yes, there will be times of uncertainty leading to drawbacks, but the overall trend should continue in an upwards fashion.
Market Reaction & Metrics
Although heading in to this past weekend there were brief flashes of a potential run upwards, the days that followed were wholly unremarkable from a price and sentiment standpoint. Meanwhile, fundamentals such as hash rate and market dominance continue their recent trends
As stated, a brief period of volatility hit BTC on New Years Eve before giving way to a mundane weekend, which saw the top digital asset exit at the same price it entered – roughly $47,000.
Despite the recent downtrend in pricing, the strength of the Bitcoin network continues to build with hashing power residing near all-time-highs. With the network now fully recovered from the exodus of miners mid-2021, the coming year should see constant upwards pressure continuing this narrative.
While it remains firmly entrenched as the #1 digital asset, the growing popularity of the sector has meant that Bitcoin’s past market dominance has dwindled greatly. In 2021 we saw this figure drop from roughly 70% to an all-time-low now being recorded at just under 40%.
The last time BTC dominance approached these levels was in the midst of the most significant market downturn of 2021 in mid-May. In the months that followed, BTC began to recapture market share, posting new highs along the way. Investors will no doubt be wondering if these actions will repeat themselves in 2022, or if alt-coins will continue putting pressure on BTC.