There's a lot of factors to consider when it comes to what the price point of BTC or Bitcoin will be at the end of the year 2022. It's been a painful ride for many of those in the crypto world in the past year, and there have been some massive dips.
When you combine this with the global economic outlook, it's safe to say that while bitcoin will end at a much higher price than what it's currently looking at now in November, it won't be what was expected by analysts and those in the industry thought 2022 was previously going to look like. Financial content providers and financial content authors mostly agree that bitcoin will mirror economic situation worldwide in the near future.
What happened that has pushed down BTC so much
In 2021, we heard of bitcoin prices hovering near the $70,000 mark. It was a huge bull market, and then 2022 hit, and so many factors occurred that may have helped bring Bitcoin to under $20,000 by November 2022. It's important that while no specific factor is an indicator of where Bitcoin is going, there were enough negative factors that definitely influenced the bitcoin prices going down.
In the world of crypto itself, a major factor was that uncertainty became a reality, and while there were signs of it everywhere, it all came to fruition when the Terra–Luna project became completely insolvent. The Terra project was working towards building an algorithmic stablecoin that was pegged to the US Dollar. That simply means that each token was worth exactly one dollar without the need to actually have that dollar.
That may be a liquidity dream come true, but in reality, it was akin to a concept of 'printing more currency', and eventually, the hyperinflationary bubbles ended up exploding. The stablecoin de-pegged from $1, and that had a cascading effect on the community.
Investment hubs such as Celsius and 3AC were heavily invested in the Luna token as well as UST, which was the stable token. In less than a few weeks, billions of market capitalization were lost, and hundreds of millions of actual client money also ended up disappearing into thin air. These companies quickly became insolvent, with frustrated clients out of their investments. This built a distrust towards cryptocurrencies, especially bitcoin. It was the opportunity for larger investment players to enter into this space, and instead, the results ended up being catastrophic.
To continue the journey of the big push downward for BTC, recently, there's been a major collapse of one of the largest exchanges on the current market, and that is FTX. FTX began its history with some smart people behind the operations and primarily made their returns with arbitrage trading, taking advantage of FX and discrepancies with pricing. This led them to be one of the top five exchanges that helped to build stability in the markets.
FTX was known to provide liquidity and work to bail out other firms, such as those mentioned above, that helped bring necessary liquidity and stability to the cryptocurrency markets. Unfortunately, FTX itself eventually crashed due to mismanagement, amongst other issues, in early to mid-November 2022. This eliminated any rally that was seen at the end of October and promptly pushed Bitcoin back down to $16,000 from a rally where it was around $21,000 comfortably.
These are just the highlights of an industry that has seen its overall market cap cut down by more than 50% in the past year, and it's understandable that as we approach the end of the year, there's really any direction Bitcoin that can go in.
How regulations have also affected the pricing
Regulations came down hard at the end of 2021 and throughout 2022 when governments were bringing regulations to exchanges accepting global users. It all began in mid-2021 when China announced an official ban on crypto mining (a way to produce bitcoin), and that cascaded down to those operations moving to different locations.
Yet then, more countries brought stricter regulations on centralized exchanges, and the KYC required an opening of accounts. This shone a light on an industry that was built on trustless transparency combined with anonymity, which also started having some players no longer interested in the markets as they once were.
Traditional markets also worked to push the pricing down as well
Markets were rocked this year as the end of the pandemic pushed economic issues to many of the major economies out there. The U.K. Eurozone and the U.S. faced record-high inflation rates that forced them and many other countries to combat these inflationary rates with interest rate hikes.
Since cryptocurrencies, especially bitcoin, are directly related to the cost of money, increasing interest rates adversely went on to affect the pricing of Bitcoin. With each interest rate hike that would occur in the US, there would be a subsequent decline in the price of Bitcoin as the price of the dollar went up.
That’s because safer investments such as savings accounts and bonds would be more appealing since the interest rates would go up, and cryptocurrencies were again affected by massive pullouts from the markets. The interest rates have also affected global markets, with key markets in the US underperforming and down across every sector. So while cryptocurrency should be trending opposite to most markets, it is also now starting to follow the wider markets as well and going down in tandem with them.
The markets are headed in this downward direction because of inflation rates going up, economies slowing down, and interest rates on the rise, thinning out people’s budgets and disposable incomes. While it's not a globalized recession yet, the signs are pointing to that and, thus, have affected the crypto markets drastically throughout the year.
The case for an increase in price by the end of the year
With all of this doom and gloom mentioned above, that’s actually great news for those that are looking to see where Bitcoin is going to end up at the end of the year. One thing is for sure, it won't stay at these stagnant prices, and all indicators are trending upward.
One thing to note is that it seems all the expected damage that could have occurred has occurred this year. People have tasted loss and have seen that the market is extremely volatile but, at the same time, is quite resilient. The overall market didn't collapse into zero dollars, and in fact, it is showing signs of stability throughout every action that has occurred that could negatively affect the market. For example, a major exchange – which is a major source of liquidity- did not deter the markets as much as it could, and now there are signs of a rebound and signs of life within the market.
That’s because of how cryptocurrency markets are. They never close and are open 24/7, trading globally all the time, which makes liquidity important, but there’s also a much larger pool to help maintain it. In fact, one exchange crashing down means other exchanges can pick up the slack. With that said, Bitcoin looks to be ending its price point at a much higher amount by the end of the year.
The price is expected to end above $21,000 by the end of 2022, based on sentiment and the resurgence of a bullish market. Keep in mind that the global economies, in general, had an effect and that the consistent rise of interest rates throughout 2022 helped with bringing down the price of Bitcoin as well. Since it also looks, especially in the US, that inflation is starting to hit its peak and slow down, the case to raise interest rates and thus make money more expensive will also disappear.
The case for Bitcoin to go lower
Yet while there's bullish sentiment across the markets, it will only take any new instance to break the confidence in an already fragile market. That means if there's any news through the end of the year of another instance of an exchange losing its liquidity or investment firms going under because of poor crypto management, then that could push the overall market, and bitcoin, down even further, even below it's once recorded milestone pricing of $10,000
While it seems unlikely through the end of this year, it's still important to note that it's still a possibility and to act accordingly. Then it can be considered to have hit a true 'rock bottom' per se, and thus can expect healthy rises and returns throughout 2023. While it is not the general sentiment with the way the markets are behaving, due to how volatile these markets can be, it’s important to always note that crypto market behavior is anything but traditional.
How bitcoin should look with the rest of your portfolio
Although not specific financial advice, it's important to note that Bitcoin tends to fall under a 'speculative' investment. Those types of investments tend to be the ones that can offer substantial returns yet come at much higher levels of risk and the chance to lose all your funds as well. At the same time, buy-in and regulations do help in the long term. So it's always a good idea to go with this as a small portion of your overall portfolio.
This will help to mitigate the potential losses that can be very real before you know it, and thus when you're trying to chase the immense returns that are given through cryptocurrencies; you don't have to put in the entire basket.
In the end
It's a wait-and-see moment for many, as people want to see what happens in traditional markets first. What will the recovery look like, and where will it be headed? That will help to alleviate local market risks and thus have a big push again into the crypto markets, which peaked as economies around the world peaked as well. We're in what is known as a crypto winter, so any positive movement is one that you should take notice of.
Yet Bitcoin is still considered the gold standard of the cryptocurrency markets, so it helps produce its own source of stability (since nearly 40% of the market is bitcoin). It will recover as the rest of the global markets continue to do so, entering the lucrative holiday season.
It's also the best option to look into when entering into crypto markets, as it tends to be a more stable option than another cryptocurrency. Don't let those words fool you, though, as Bitcoin itself has been known for huge swings, even with its current price point.
Keep in mind that this is only possible as the rest of the year closes out, without any other type of crash or failures happening either on the exchanges themselves or with the traditional markets taking a dive. That's why even if it seems there's room to grow through the end of the year past the $21,000 per token mark, it's still important to have a more patient approach.
The reason being is that if it does hit those highs, and there's a recovery throughout the crypto markets, then the estimates for the next year will only go up, and the returns potential as well. That means pricing per token of bitcoin is limitless, and it will be able to go much higher and faster than those traditional markets.
If you wait and a further dip happens, then there's even a better opportunity to be able to jump in and ride a longer recovery wave with better returns as well. So let's see how the year closes out and see if the estimates that people are discussing are hit. Then you, as an informed investor in Bitcoin, can make your decision accordingly.
As always, estimates and forecasts are just that, and what the year-end may actually look like could be nothing like what's been mentioned to us. But, again, this is because we still don't know how past market actions will continue with the current pricing and what the next one to two months will look like as well.
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