Factors Driving Bitcoin’s Price Upward in 2022

t’s clear that 2021 is a landmark year for the crypto market. In this year, the price of Bitcoin has risen by more than 150%, and mining output has reached 90%. At the same time, the dominance of Bitcoin as a share of the overall crypto market has dropped from 70% to 41%. It will take about 119 years for the remaining 10% of Bitcoin to be mined due to the periodic halving events, its self-adjusting difficulty, and other pre-programmed elements of the world’ most popular cryptocurrency.

In the last month of 2021, Bitcoin is in an unexpected price range, with the high probability that it will not reproduce the explosive growth in value witnessed at the end of 2013 and 2017. While this has raised concerns that the bull market maybe over, there are two market fundamentals driving Bitcoin’s upward price in 2022.

In a recent cryptocurrency forecast survey conducted by the media of over four thousand respondents, when asked whether their minimum price of BTC in 2022 would exceed $100,000, 46.8% of the respondents agreed the price of BTC will reach between $100,000 and $150,000, while 10.9% expected the price to exceed $200,000.

Such investor confidence comes from the inbuilt deflationary nature of Bitcoin to a large extent. Its maximum supply at 21 million coins cannot be changed, coupled with the fact that the difficulty of mining will increase every four years. This leads to the fact that Bitcoin will become more and more valuable. Another trend that’s been predicted for 2022 is the accelerated inflow of Bitcoin into DeFi, which will prompt it to appreciate in price again.

As for the benchmarks in the traditional stock and bond markets, the liquidity is too poor, and it has been continuously diluted, and the depreciation rate is too high. Long-term US Treasury Bonds cannot be maintained above 2%. This phenomenon may lead to a deflationary environment next year, which is also beneficial to Bitcoin.

There is also good news that in 2022, the US should have clearer supervision of Bitcoin, which will raise it to the same status as traditional investment products, allowing more and more institutional funds to legally invest in Bitcoin. “The price of Bitcoin is known for huge rallies and crashes, and I’d expect at least one big upswing and downswing in 2022,” predicted Logan Kane, writing in Seeking Alpha last month. “Factors that are likely to cause Bitcoin to push higher include ETF approval, institutional adoption (especially other companies like Tesla adding BTC to their balance sheet), user adoption, and good old-fashioned FOMO. Some risks that could cause Bitcoin to fall include a black swan involving Tether, ESG concerns, and higher interest rates in the US and EU,” he added.

Moreover, due to the relationship between the pandemic and inflation, the monetary policies implemented by various countries could also help drive the price of Bitcoin. In particular, the tightening monetary policy proposed by the US Federal Reserve may eventually trigger a crisis in the stock and bond markets, to the benefit of Bitcoin investors.

Therefore, while Bitcoin is currently at a low point, you may wish to take advantage of the opportunity and buy appropriately. According to the latest weekly report from Glassnode, the net flow of Bitcoin in the past few months has been mostly negative, although the price has been on a downward trend during this period.

“Net flow of all exchanges” is an on-chain indicator whose value is calculated by calculating the difference between inflow and outflow. If the indicator is negative, it means that the outflow exceeds the inflow at this time. For a period of time, this trend may mean that holders are accumulating BTC while withdrawing a net amount of coins. Of course, this can prove to be beneficial to cryptocurrencies.

Finally, there is still a strong belief in the future of the cryptocurrency. Bitcoin is the world’s oldest cryptocurrency with a market value that has reached $1.1 trillion and now exceeds 40% of the token market. Although it is entirely possible for other tokens to become popular and bring tangible improvements to BTC, it is difficult to see any token such as Ether stealing its throne from it.