The last ten years have seen huge changes in the cryptocurrency world and sure, changes will continue to happen in the future.
Bitcoin, for example, has moved from an interesting experiment in the mass investor's portfolio to a new class of assets and is even known as the digital gold.
The price of bitcoin and other major cryptocurrencies is falling sharply
Cryptocurrencies are definitely part of the spirit of the new times, and speculators are desperate to understand how bitcoin will evolve and respond to the rapidly changing market in 2022.
As interest in cryptocurrencies grows, the rise of bitcoin has been somewhat slowed by the emergence of rival currencies that seek to dominate the market.
Bitcoin does not meet analysts' forecasts for early 2022, as its price is well below $100,000, although there is hope that this will change in the upcoming months.
Until a few days ago, the total value of all digital currencies was 2.34 trillion dollars. This is a triple increase from where the crypto market started the year.
What can affect the price of bitcoin?
As the cryptocurrency market is still in its infancy, there is not much history on which to base models and forecasts.
In addition, the lack of historical experience makes it very difficult to determine what social and political factors could affect the price of bitcoin and other cryptocurrencies in the future.
The change in monetary policy of the United States Federal Reserve is causing some concern among bitcoin enthusiasts. The Federal Reserve has announced that it will end its bond-buying program at a faster pace, ensuring that projected interest rates rise significantly by 2022, which could increase pressure on bitcoin in the short term.
The cryptocurrency market will undergo a significant correction
Since the cryptocurrency space is driven primarily by hope and expectations rather than something tangible, it would be wise for investors to expect a major correction in 2022.
For starters, history shows that reversals are commonplace. The total value of all digital currencies has risen by more than 1,500% in the last 21 months, but we are still not seeing significant growth in blockchain acceptance or the use of cryptocurrencies outside of El Salvador, giving bitcoin (CRYPTO: BTC) green light as legal tender.
With that in mind, the cryptocurrency market has failed to break away from the stock market during periods of volatility. Although investors may view digital currencies as their own unique units or even as hedging against the stock market, the data clearly shows that when the stock market adjusts lower, digital currencies follow. This is something to worry about, since there are expectations that a double-digit percentage adjustment in the stock market may be on the horizon.
Investors should also be concerned about the use of margin in the crypto space. As some crypto exchanges offer their clients up to 100 times leverage on their monetary position, a rapid move in the wrong direction could shake margin bidding, which in turn can reform the entire market.
Should you invest in bitcoin in 2022?
It is the lack of empirical historical landmarks that makes such a question extremely complex, although preliminary models suggest that 2022 in general may not be as successful a year for bitcoin as 2021 has been.
Intensified attempts to impose government control over cryptocurrencies have not only failed to regulate cryptocurrencies, but have recently caused intense price fluctuations that have always panicked investors, creating a domino effect.
Some experts predict that there may be a sharp decline in the value of bitcoin in the first months of 2022. Maybe people should keep an eye on the market - at least for now, instead of jumping headlong into investing.