Persistent inflation, tighter monetary policy or a reversal to lower inflation leading central banks to keep rates low are all scenarios that could play out and impact crypto markets in 2022, the crypto provider said. data CryptoCompare in a new document.
The document details CryptoCompare’s view on the past year and the outlook for 2022. It indicates that the most likely macroeconomic scenario is the persistence of inflation in 2022, which makes it plausible that the crypto will outperform other classes. of assets. This could happen “as Bitcoin assumes its position as an anti-inflationary store of value,” the report says.
However, the authors also noted that a different, bearish scenario could occur. In this case, continued inflation could force central banks to raise interest rates, which could lead to outflows from the crypto sector into “more defensive investment classes.” This is also true for the stock market, which Bitcoin is likely to follow as it becomes “more institutional,” according to the report.
CryptoCompare said the least likely scenario is a separation of crypto from traditional financial markets due to factors specific to this nascent space. This could be due to things like deep innovation and a booming ecosystem, which have the potential to impact crypto-asset prices regardless of the macroeconomic backdrop.
Separately, CryptoCompare also touched on the current debate on the current situation of the market cycle as many players claim that the bull market is not over as no tops have been seen yet.
The report notes that the camp convinced by 4-year cycles – which roughly correspond to Bitcoin’s “halving” cycle – are correct in saying that the classic “blow-off top” has not yet taken place. The authors nevertheless mention some analysts holding the opposite view who claim that the theory of cycles is wrong and that past cycles are just coincidences. Based on this, “the crypto may currently be in a bear market following the aforementioned drop in November and December,” the report states.
The paper predicted that the decentralized finance (DeFi) ecosystem will become more institutional in the new year, mirroring traditional crypto-assets seeing increased adoption by institutions in 2020 and 2021, such as illustrate the entry of veteran investors like Paul TudorJones in Bitcoin.
“We expect this trend to accelerate in the coming years. There are many optimists in this regard, the most famous being the CEO ofArk Invest, Cathie Wood, who said in October that ‘the institutions […] could add $500,000 to the price of Bitcoin if they move by around 5% [de leur portefeuille] over time,'” the report said.
Finally, CryptoCompare pointed to the adoption of cryptocurrencies by individuals in emerging countries as a key factor in driving the asset class forward.
He said he expects emerging markets in Latin America, Asia and Africa to see an even faster rate of cryptocurrency adoption in 2022, citing “major economic challenges” and high inflation in many developing countries.
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