A bitcoin over $ 100,000 by the end of 2022. The idea makes some smile, while others believe in it. Right or wrong? Decryption.
Bitcoin’s price broke all records in 2021. On November 10, the cryptocurrency star was on the heels of the highest peaks, with a valuation greater than $ 68,000. But the fall was also dizzying. In early December, the price of bitcoin fell back below $ 46,000. Then even under $ 42,000 in the first week of January 2022.
Despite its high volatility, the queen of cryptos records over the year spectacular growth (+ 58.14%), although clearly below the explosion observed in 2020 (+ 309%). Will the rise in prices resume in 2022, after the correction at the start of the year? Is Now a Good Time to Invest in Bitcoin? We take stock.
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Emerging appetite of banks
If until 2020, the craze for bitcoin was confined to individuals, 2021 marks a turning point, with the arrival of leading institutional players. Institutionals and large international companies are investing more and more in bitcoin, mainly to diversify their financial investments, explains Jonathan Herscovici, founder of StackinSat, a French platform that offers a bitcoin savings plan.
At first skeptical, Wall Street banks have stepped up small steps towards virtual currencies and the returns – quite real – they earn. In March 2021, Morgan Stanley becomes the first major US bank to offer its clients exposure to bitcoin. Then, a few months later, Goldman Sachs announces that it has successfully launched orders on cryptocurrency derivative products.
The first of the cryptocurrencies gains in return an indefinite legitimacy. Its price jumped for the first time in April, with the entry into the stock market of the cryptocurrency exchange Coinbase. Then it recorded a new peak in October, following the launch of the first index fund (ETF) backed by bitcoin.
But will the initial enthusiasm for financial gloves be confirmed in 2022? This is what Loukas Lagoudis, of the ARK36 cryptocurrency investment fund, thinks. Asked by AFP, he expects the adoption of digital assets by institutional investors and their integration into the traditional financial system to further push the crypto market in 2022.
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Fears of regulation
That said, Wall Street bankers aren’t the only ones interested in cryptoassets, bitcoin in mind. Regulators are also watching with concern the arrival of these new kind of coins. If El Salvador made an impression by becoming the first country to raise bitcoin to the rank of national currency, not everyone is so enthusiastic. Far from it.
China, in particular, has declared war on cryptocurrency. And the Middle Kingdom is not taking half measures: in September, the Chinese Central Bank issued a terse press release announcing that commercial activities linked to virtual currencies would henceforth be illegal. Overnight, bitcoin became persona non grata. Shortly after, the Chinese authorities again toughened the tone by adding the mining, this cryptocurrency extraction process, on the negative list, a document grouping 120 sectors restricted or prohibited to foreign investors. The decision is not trivial: China alone represented almost half of the mining operations in the world.
But no need to cross the globe to observe the reluctance of the regulators. Last June, the Governor of the Banque de France, Franois Villeroy de Galhau, already pleaded for the rapid establishment of a European regulatory framework. Whether it’s digital currencies or payments, we in Europe must be ready to act as quickly as needed, or take the risk of an erosion of our monetary sovereignty, he alerted the occasion of the annual financial conference of Paris Europlace. In the absence of visibility on the intentions of the regulators, it is difficult to estimate with precision the trajectory that the price of bitcoin could take in 2022.
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A bulwark against inflation?
To make matters worse, the new year will be marked by inflation, which marks its big comeback: it is estimated at 2.8% for 2021, its highest level since 2008. Good or bad news for bitcoin? Again, difficult to say.
Often compared to gold, bitcoin could overshadow the yellow metal and become the anti-inflation safe haven for young investors, according to analysts at JPMorgan. An observation shared by Jonathan Herscovici: We have a long-term belief in bitcoin that could even reach $ 1,000,000 in several tens of years, when he will have gained his status as a world money stallion as was gold before the end of the Bretton Wood agreements in 1971.
A course still so unstable
The year 2022 began with a sharp drop, of nearly 10%, on January 5. A sufficient argument, according to Vincent Boy, market analyst at IG France, to dismiss the idea that bitcoin could become an uncorrected value from speculative markets or even a reserve value: the significant fall [de mercredi], although linked to the fall observed in traditional financial markets, shows once again that bitcoin is, for the time being, none of that.
Worries about rising prices are also hurting the cryptocurrency star. There is growing speculation about central bank action to curb inflation, said Susannah Streeter, analyst at Hargreaves Lansdown, AFP. However, according to her, it is precisely these massive bond purchase programs that have flood the markets with liquidity in favor of the riskiest assets, like cryptocurrencies.
If the bitcoin could indeed suffer from the disappearance of the measures to support the economy of the central banks, the big financiers want to be reassuring: there will be no sudden rise in rates in 2022, specified the European Central Bank (ECB).
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Competition from 16,000 cryptocurrencies … including ethereum
Bitcoin is today the queen of cryptocurrencies. But will she stay that way? While some experts are convinced, others blame it for its overly energy-intensive infrastructure. Bitcoin indeed works on proof of work (proof of work). In other words, miners must mathematically validate each transaction, which requires a lot of computing power. The Digiconomist organization thus estimates that bitcoin’s energy needs would represent 0.4% of global electricity production, or as much as consumption in the Netherlands!
According to the Coinmarketcap platform, bitcoin is currently in competition with more than 16,000 cryptocurrencies. And if the first virtual currency still weighs 39% of total capitalization, ethereum, the second largest cryptocurrency (20% of total capitalization), is gradually reducing the gap. In January 2020, for example, 53 ethereum tokens were needed to buy 1 bitcoin. Now you only need 12.
The trend could well accelerate in 2022, since ethereum is about to evolve its model by abandoning the current transaction validation process, which consumes energy. proof of work, for the benefit of proof of stake (proof of stake), both faster and more environmentally friendly. By contrast, the decentralization of bitcoin makes any evolution virtually impossible. A weakness, but also a strength, as judge Frank Downing, analyst at ARK: The reluctance of bitcoin to change its pattern is, in our opinion, one of the characteristics that makes it stable and consistent, which is necessary for a real global currency.
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