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Although the end of 2021 did not result in a dream scenario with an attack on the price of $ 100,000 for 1 BTC, it is necessary to retrospectively assess that the past 365 days have been very successful for the crypt market and no one would mind if such a scenario were repeated in in 2022.
Looking back on cryptocurrency prices, it is ridiculous that even in 2021, it happened at least 45 times that the mass media called Bitcoin dead (we wrote about it here). It's hard to find logic at a time when Bitcoin has set new price highs several times.
What do bitcoin foundations look like?
Onchain data suggest a lot about bitcoin health. The year 2021 was marked by an increase in the number of bitcoin addresses with at least some balance, at least 0.01 BTC or at least 0.1 BTC. This is the so-called "Retail addresses" because these balances are not "rare" enough to be attributed to institutions. In other words, constantly new historical highs at these addresses indicate that the adoption of bitcoin is growing in ordinary people. This is a great statement, because if Bitcoin is to fulfill its goal, it must be the name of ordinary people and not just a few large institutions.
The good news is that in 2021, Bitcoin was able to recover from a huge hash rate collapse after the May ban on cryptocurrency mining in China. The decrease of more than 50% was offset by the end of the year. Hash rate, the total computing power expended on its mining, is currently still close to historical highs, which confirms that the miners above BTC are by no means breaking the baton and are still struggling for new coins. The year 2021 was marked by large billions in investments in building new infrastructure, and several mining companies have either entered or are planning to enter the stock exchange. From this point of view, it certainly doesn't look like Bitcoin is going to "die".
For Bitcoin, if it is to be not only a holder of value (a kind of digital gold), but also a means of daily payments, it is important that the adoption of Lightning Network technology grows. The second bitcoin layer solution, which enables instant, express and very cheap BTC transactions, was the most talked about in history in 2021. El Salvador's decision to use the Lightning Network to adopt Bitcoin in this Central American country has certainly contributed to this, especially for important remittances. LN's decision to integrate LN payments into its network has certainly contributed to the promotion of LN, although so far only within certain regions.
Rough data is the best indicator of the adoption of Lightning Network. According to BitcoinVisuals.com and 1ML.com, approximately 8,250 nodes, 33,700 channels were active within the Lightning Network at the beginning of January 2021, and the network capacity was around 1,050 BTC. Today, January 2, 2022, there are 32,248 nodes, 84,000 unique channels and 3,315 BTC. These are still not numbers that would make a "hole in the world", but the adoption of the Lightning Network has risen significantly year on year.
The fact that, according to onchain data, the will of investors to withdraw bitcoins from stock exchanges rather than send them there has long prevailed also positively for Bitcoin. The only exception was the period in May and June this year, to which the negative news from China contributed and this was reflected in the fall of the BTC price. In recent months, however, the trend of BTC outflows has prevailed, meaning that those who did so indicated a clear willingness to keep bitcoins safe and not sell them.
The behavior of long-term investors seems to be positive for Bitcoin - that is, those who, according to onchain data, have not moved bitcoins for a long time. Even the fall in the price of BTC in the last weeks of 2021 did not change their approach, and it is still true that they are getting rid of bitcoins only very slowly or not at all. In other words, they are not panicking yet and they value their bitcoins more than their current price in dollars.
Bitcoin in 2022 - what will affect it?
You will not find any price prediction in this article. We do not know whether Bitcoin will end 2022 in the red or in the red (after all, 1 BTC will always be 1 BTC). Therefore, we will not mention any models based on the previous historical development of the BTC price. Bitcoin is influenced by many factors that it "did not have to deal with" in the past. Whether it was too small to bother him or because it didn't exist at all.
So what could affect Bitcoin in 2022? It will definitely be the following:
QE / Interest Rates - The Fed, the US Federal Reserve, is slowing down quantitative easing due to rising inflation (simply to push money) and is likely to start raising interest rates in 2022 - these steps will also affect stock market developments and thus also affect Bitcoin (In times of uncertainty, the correlation of Bitcoin with technological actions is especially obvious). Similar steps can be expected from the ECB.
Inflation - a follow-up to the topic of QE and interest rates. Rising prices can affect Bitcoin in two different ways - BTC can be attractive due to its characteristics different from Fiat currencies (a limited number due to decentralization makes it rare), but also risky (in times of uncertainty, risky investors may be afraid to stick to BTC). It is questionable which of these prevails.
Adoption in banks - laws in the US will be addressed that may make it easier for US banks to deal with bitcoins (selling and buying them to clients). It is possible that Bitcoin will gradually settle in them, which may contribute to its adoption, although not in an ideal way (not your keys, not your coins).
Bitcoin ETF - After the approval of the Bitcoin Futures ETF in 2021, it may be the first approved spot Bitcoin ETF. Such a product would be very attractive for institutional investors from the USA. Grayscale, which owns approximately BTC 650,000 through the Grayscale Bitcoin Trust, is likely to have the best chance of approval (the largest institutional BTC holder).
"Eco-battle" against BTC - there will certainly be many reports of how Bitcoin is harming nature. It is therefore important that BTC miners increasingly use green resources for their business (the excellent thing is that they are motivated to do so in a natural way, because green energy is cheaper). This topic in itself is bloated, but at a time when the myths that Bitcoin is only an instrument of terrorists are dispelled, it is very popular among critics of cryptocurrencies (especially politicians).
Geopolitics - Can Bitcoin Become a Currency for an International Settlement? This topic appears only sporadically so far, but at a time when tensions between the US and Russia (the topic of sanctions, Ukraine) and the US and China (trade war) are escalating, perhaps everything is possible. Putin himself opened the subject in 2021 by not completely throwing Bitcoin off the table as such. In 2022, other signs may emerge. However, geopolitical nervousness is a phenomenon that we definitely do not want.
State fight against BTC - it does not look like the US is planning to ban cryptocurrencies (although concerns are raised by the unfortunate wording of the Infrastructure Bill). However, decentralized cryptocurrencies are hated by China, and Russia has a questionable stance on them (Russia's central bank wants to ban them, but politicians are under pressure from lobbyists who have a lot of money in the crypt). There will certainly be other alarming reports of a cryptocurrency ban in India. At this point, however, it can be said that as far as the "west" is concerned, it looks more like strict regulations (especially the DeFi sector and stablecoins), but not bans.
COVID 19 - we do not know how many more waves and lockdowns we will have to deal with in 2022 - a pandemic affects not only human health but also the economic situation. It slows down supply chains and this in turn contributes to rising inflation. Inflation, mentioned so much, is a topic that is constantly associated with Bitcoin.
Cryptocurrency adoption - the year 2021 brought a record number of people to cryptocurrencies. Thanks to new phenomena such as DeFi, meme coins, but especially the NFT, adoption has reached an unprecedented level, although of course it has been driven to a great extent mainly by the vision of getting rich quick. However, it often happens that those who enter cryptocurrencies understand their significance over time. It is possible that Bitcoin and crypto in general are approaching a turning point in the adoption curve, which may already be unstoppable. Similar to what happened once with the internet. Several surveys suggest that every tenth person on the planet may already own crypto (some surveys also report a higher percentage). Will 2022 be a year when development "breaks down" and the adoption of cryptocurrencies becomes definitively unstoppable? By the way, elected politicians are well aware that they must play for the benefit of their constituents.
