Bitcoin has seen its price boosted in 2021 by traditional finance’s appetite for this new type of investment, but cryptocurrency specialists are struggling to predict how this volatile sector will behave in 2022
After chaining records at the end of 2020 and at the start of the year, bitcoin seems to have lost some of its shine. Between December and April, the cryptocurrency chained the highest historical highs, going from less than 20,000 dollars to more than 60,000 dollars. A boosted performance, fueled by the interest of big names in new technologies and finance, who until then kept away from this technology which has only existed since 2008.
But since then, and despite a new record in October, bitcoin has continued to soar with equally spectacular plunges, and was trading at the end of December at less than 50,000 dollars.
An analysis of these fluctuations: Bitcoin: a currency, gold or nothing?
“The choppy and directionless price performance, which could translate into further decline in the short term, makes the market very uncertain,” admits Loukas Lagoudis of cryptocurrency investment fund ARK36.
But “we expect the adoption of digital assets by institutional investors and their integration into the traditional financial system to further push the crypto market next year,” he wants to believe.
This is indeed what has boosted the price of bitcoin since the end of 2020: announcements related to cryptocurrencies have multiplied over the months, from the big names in traditional finance to those in new technologies.
A difficult market to grasp
While El Salvador’s adoption of bitcoin as its official currency made an impression, investors focused on Wall Street’s appetite for cryptocurrency.
Related: Bitcoin drops on its first day as El Salvador’s official currency
The highest of the Bitcoin in April coincided with the IPO of the Cryptomonnaie Coinbase Exchange and Purchasing Platform, and the October record with the approval by the regulator of index products related to the bitcoins.
Either way, cryptocurrency enthusiasts approve of what they see as signs that the market is settling down.
The risk of regulatory action weighs indeed on the cryptocurrency, created in the wake of the financial crisis so as not to depend on central banks – and whose very high electricity consumption is often criticized.
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In China, the state banned cryptocurrency transactions at the end of September, and regulators in Europe and the United States are increasingly focusing on this decentralized network, which is very difficult to regulate.
“There is never certainty when it comes to crypto, let alone regulation. But one thing is certain, the voices calling for more regulation of cryptocurrencies will be louder and louder,” warns Huong Hauduc, of the Bequant exchange platform.
The appetite of the very rich, and rising competition
So far, bitcoin’s criticisms aren’t stopping some of the world’s richest men from taking an interest in it.
Tesla boss Elon Musk has regularly moved the market, notably by announcing that he has invested part of his group’s cash in bitcoin.
More radical, Jack Dorsey left the direction of Twitter to focus on his digital payment company, Square, which he renamed Block and where he intends to develop his activities related to cryptocurrencies.
But bitcoin also risks competition from other cryptocurrencies.
According to the specialized site CoinGecko, which lists more than 12,000 cryptocurrencies, this market represents 2.360 billion dollars, of which more than 900 billion for bitcoin alone.
Its share has dwindled over the year, and as number 2, Ethereum, prepares to attempt to evolve its model, some are wondering if the decentralization that makes bitcoin’s evolution virtually impossible, will not cause his downfall.
“Bitcoin’s reluctance to change its model is, in our view, one of the characteristics that makes it stable and consistent, which is necessary for a real global currency”, answers however Frank Downing, analyst at ARK.