- Some analysts think crypto will see a huge plunge in prices next year, but others disagree, saying the industry is well prepared for the upcoming challenges.
- Most analysts agree on tougher regulatory measures in the industry next year, especially for stablecoins.
This year, the crypto market has risen to a more than $2 trillion valuation from $668 billion last year. Crypto king Bitcoin (BTC) has risen nearly 70 percent since the beginning of the year. Coinbase has become the first crypto-related company to go public, and Wall Street players such as Goldman Sachs have doubled down in crypto. Even more, the US Securities and Exchange Commission (SEC) approved the country’s first Bitcoin futures exchange-traded fund (ETF).
But even in light of these and many other successes, the industry still faces strong headwinds.
Several analysts believe Bitcoin and its brethren are faced with an imminent crash in the upcoming months. Carol Alexander, a professor of finance at Sussex University, expects Bitcoin to plunge to as low as $10K in 2022. She urges investors to “come out of Bitcoin soon,” saying it is a “toy” with “no fundamental value.”
Crypto life or death in 2022
BTC has tanked 30 percent from its near $70K peak in November to trade below $50K. According to Wall Street analysts, a decline of 20 percent or more signifies a bear market. However, BTC’s volatility might just invalidate this.
“Without question, Bitcoin’s price chart appears to track many historical asset bubbles and busts and is carrying a ‘this time it’s different’ narrative just like other bubbles,” said Todd Lowenstein of Union Bank.
Differently, Yuga Hasegawa from Japanese exchange Bitbank is confident crypto will not die in 2022.
The biggest risk factor, namely [quantitative tapering]by the Fed, has been decided and likely priced in already.
Additionally, speculation is high on the approval of a Bitcoin spot ETF next year. Futures ETFs are more expensive and riskier, especially for novice investors. The US watchdog is also under great pressure to approve such an offering.
DeFi to see growth and tougher regulation next year
As for the decentralized finance (DeFi) sector, Alexander expects DeFi- backing altcoins projects to surpass Bitcoin since they claim a fundamental role.
“This time next year I predict that Bitcoin’s market cap will be half the combined cap of smart contract coins” like Ethereum and Solana, Alexander added, “or even less.”
Bryan Gross of the ICHI crypto platform thinks DeFi and decentralized autonomous organizations (DAOs) will “likely be the highest growth areas of crypto,” in addition to Web3. The latter, however, has already found skeptics in influential persons like Elon Musk and Jack Dorsey.
Read More: Jack Dorsey, Elon Musk dismiss Web3 as a marketing buzzword that “sounds like bs”
What is common in most analysts is their expectation of tougher regulations for the crypto industry next year. Vijay Ayyar, of crypto exchange Luno, expects regulators to clarify the “gray zone” of crypto securities and assets.
Specifically, regulators are likely to focus more on stablecoins to prevent a crisis similar to that of housing and mortgage of 2007-2010. Todd Lowenstein of Union Bank added;
Undoubtedly more scrutiny is forthcoming around stable coins as regulators look under the hood on the soundness of the underlying collateral and amount of leverage deployed,
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