The largest cryptocurrency in the world has been a negative performer for the past 3 months, and has shredded all the profits it made since it’s all-time-highs of nearly $70,000. Bitcoin remains as the the number 1 digital asset in terms of market cap, but the market dominance and the price of the coin has steadily been declining since the last quarter of 2021. While many altcoins are boasting a record year in terms of growth in 2021, many institutional investors have been losing billions of dollars from Bitcoin. Since Bitcoin has failed to break the $50,000 barrier for over a month now, how much longer do we have to wait before Bitcoin eventually begins its bull run in the new year?
Why Did Bitcoin Rise?
From the end of September to Mid November, Bitcoin soared from a price of just $42,000 to rally to $69,000. In this process, the Bitcoin market cap crossed $2 billion for the first time, while the crypto markets reached an overall value of over $3 trillion. A variety of factors led to this, but the overall market sentiment was formed as a result of two main reasons that acted as a catalyst for the Bitcoin bull run. Firstly, 2021 was a big year for Bitcoin’s dominance on mainstream monetary channels. https://twitter.com/nayibbukele/status/1434948725550551042?s=20 On September 7, the world witnessed the biggest announcement related to the crypto industry – when El Salvador became the first country in the world to adopt Bitcoin as legal tender. President, Nayib Bukele, took to his Twitter handle to make the announcement official. “Tomorrow, for the first time in history, all the eyes of the world will be on El Salvador”. The other huge announcement that actually triggered the BTC to $70K run was the first ever Bitcoin based ETF (Exchange-Traded Fund) in the United States. Asset Manager ProShares launched the Bitcoin futures exchange-traded fund Mid-October, after eventually getting the approval by the Securities & Exchange Commission (SEC). Once this ETF went live, Bitcoin took off on the rumours of a possible Spot-ETF soon being approved by the SEC as well. This was because the ProShares ETF was not trading Bitcoin as an underlying asset, so investors were not directly investing in Bitcoin, only companies that has an affiliation with the cryptocurrency. On the other hand, a spot ETF would allow investors to trade the cryptocurrency as the underlying asset, thus having direct exposure to Bitcoin in their investment portfolio.
What Was The Market Originally Expecting?
After these two major announcements, Bitcoin’s price went up on pure speculation, investor confidence and the hope of the United States easing its take on the crypto community as a whole. A major analyst on Twitter known as PlanB even successfully predicted the correct All time-highs for bitcoin leading up to October, making many believe that a huge price target would be met before 2022. https://twitter.com/100trillionUSD/status/1454962054297788417?s=20 This news of his possible prediction of Bitcoin going over $100K in 2021 made many extremely bullish on the token. This also was because of his successful predictions in the months before. But as we did eventually see, bitcoin got nowhere near the six-digits mark as we entered 2022, and has been falling ever since the $70K milestone.
Current Bitcoin Price
As much as ‘buy the dip’ has been trending all over social media when it comes to the king of cryptocurrencies, the actual market sentiments has been at polar opposites. Since November, Bitcoin has decline by 35%. Around the holidays period, it did briefly manage to break through the $50K barrier, but has stumbled below ever since. Now, in January, the price of Bitcoin along with other major altcoins is down once again. As of January 6, BTC has lost over 6% in the last 24 hours, and is currently trading at just over $43K, according to Coinmarketcap. But the U.S equities market has been one major reason for the fall of Bitcoin. According to Bloomberg, the price of Bitcoin has been moving similarly to the U.S stock markets in 2021. In December 2021, the 100-day correlation coefficient between BTC and the S&P 500 was 0.33. In this case, 1 means the two asset classes always move together, while -1 means they are completely divergent. Lately, the U.S equities have been down, which is why BTC slumped this past week. The major reason for this has to do with the hike of interest rates that is going to be imposed in the coming months.
Interest Rate Hike
U.S stock markets were down due to news and rumours coming from the Federal Reserve, about the possible moving up for their timetable on the eventual interest rate hike. Since the reserve has been injecting more and more money since the pandemic in 2020, they have decided to pull back on money printing, and are planning on stabilizing the economy by making it more expensive to borrow money. The possible hike is rumoured to be made official in Mid-March, which is why the market sentiment has become slightly bearish in the short-term. The Dow Jones closed down at nearly 1% on January 5, shortly after the news surrounding these rumours. Nasdaq also lost over 3%, while the S&P 500 fell by almost 2%. Despite Bitcoin being termed as a hedge against inflation, it has not managed to survive this recent correction. Since it is still an emerging asset in tech sector, Bitcoin moves in correlation to the U.S stock and tech markets from time to time. Similar was the case this past week.
Bitcoin’s Lowest Market Dominance Since 2018
Since the fall of Bitcoin’s market prices, another update that is likely to be taken with a grain of salt for bitcoin HODLers has to do with its market dominance. Market dominance refers to the percentage of Bitcoin’s market cap in comparison to the entire crypto sector. For example, when Bitcoin crossed a $2billion market cap around the same time that the cryptocurrency market was valued at $3 billion, its market dominance was almost two-thirds. But according to Decrypt, BTC’s dominance has been shrinking, and is currently just at 37.8%. We have not seen such a low number for the asset since 2018, when it dipped to below 33%. The crypto markets are valued at $2.3 billion currently, while bitcoin’s current market cap is just over $870 billion. While altcoins have slowly been emerging as more attractive investments, there is still a lot of confidence in the price of Bitcoin in the coming year.
Why Should You Still Have Faith In BTC?
The current sentiments indicate a bear market on the horizon, but many analysts are predicting the opposite for Bitcoin. Fairlead Strategies, a crypto-focused investment firm is bullish on the largest cryptocurrency going forward. Katie Stockton, the company’s founder and managing partner states that, “We are bullish Bitcoin long-term, based on our long-term trend-following gauges. We assume the long-term uptrend will mainstream itself and a more decisive breakout to new highs would allow for an impressive measured-move projection of approximately $90,000. For now, a corrective phase still has a hold, although there are potential signs of short-term downside exhaustion”.
Goldman Sachs Predict $100K Bitcoin
Goldman Sachs analyst Zach Pandl has stated that Bitcoin will take market share away from gold in the coming year. The popular investment banking firm thinks that Bitcoin will take a big chunk out of the gold market in 2022. The analyst said that, “Bitcoin may have applications beyond simply a store of value”. This gives Bitcoin an edge over gold, which is considered as a hedge against inflation as well. Pandl says that cryptocurrencies have a wide array of functions, and we have not yet seen even the tip of the iceberg when it comes to their functioning. The analyst even wrote a note that bitcoin can eventually go up to $100,000 in time, which would increase its market share in comparison to Gold.
Bitcoin ATH Prediction For 2022
The reputable cryptocurrency analyst, Wallet Investor is very bullish on Bitcoin in the long-term. Based on the 30-day market structure, Bitcoin is bearish, but Wallet Investor’s analysis supports the possibility of an 81% upside in 2022. The price could go as high as $78K in 2022, while the 5-year prediction places Bitcoin at over $200K in 2027.