The first Bloomberg crypto outlook in 2022: Bitcoin may perform better than stocks

The first Bloomberg crypto outlook in 2022: Bitcoin may perform better than stocks

According to the Bloomberg Galaxy Cypto Index (BGCI) data show——

* Bitcoin prices fell by 19% in December 2021, and the annual increase was 29%

*The price of Ethereum fell by 20% in December 2021, and the annual increase was 228%

In 2022, global risk asset prices may rise further, because the Fed will face the worst inflation problem in 40 years, and Bitcoin may benefit in the process. Among the speculative and risky asset categories, Bitcoin’s return rate is among the best, and it is gradually developing into a “world digital reserve asset.” Bloomberg Intelligence expects Bitcoin, Ethernet Square and stable currency will continue to maintain the leading position in the encryption market, Binance Coin and Solana could also further consolidate its market leadership position.

But for the broader cryptocurrency industry, in 2022, the most important sentence is “Don’t go against the Federal Reserve.”

Risky assets vs. the Federal Reserve

In 2022, Bitcoin’s bottom line may be $30,000, while Ethereum’s bottom line may be $2,000. In 2021, Bloomberg Intelligence found that the market has maintained an upward trend in most cases. For example, the Bloomberg Galaxy Crypto Index has increased by about 150%. Of course, the crypto industry must pay attention to the Fed’s tightening policy . It may be the first to bear the brunt of a decline, and it will also have an impact on the cryptocurrency industry, but in general, Bitcoin will perform better than the stock market.

Below: The crypto industry needs to pay attention to the Fed’s deflation strategy in 2022

The first Bloomberg crypto outlook in 2022: Bitcoin may perform better than stocks

Bitcoin and Ethereum have a solid foundation. After bidding farewell to 2021, the price basis of Bitcoin may be consolidated at $30,000, while the price basis of Ethereum may be consolidated at $2,000. Bloomberg Intelligence estimates that these two top cryptocurrencies will continue to maintain their market leadership and continue to rise in 2022. Some people think that 2022 may also have the same risk aversion as 2020, which may play a key supporting role for Bitcoin and Ethereum, but in fact this is unlikely. Bloomberg Intelligence believes that it is more likely that Bitcoin will move towards USD 100,000 and Ethereum will break through the USD 5,000 resistance level. One of the key issues is the Fed, because it faces the biggest inflation in four years. If risk assets continue to rise, the Fed may be more inclined to raise interest rates.

Cryptocurrency is the first choice for risk-takers and speculators. If the price of risky assets falls, it means that the Fed has achieved some success in fighting inflation. In this case, Bitcoin may be the main beneficiary.

In 2022, Bitcoin may perform better than stocks. The Fed’s interest rate hike expectations in 2022 may benefit both Bitcoin and the stock market. The chart below analyzes the 13th federal funds futures. In addition, the 60-month moving average of the S&P 500 index is also at a high level. The question now is whether the bull market can For how long, Bitcoin, the benchmark cryptocurrency, seems to have been in the lead.

Below: The biggest force preventing the Fed’s tightening policy-the vacillating stock market

The first Bloomberg crypto outlook in 2022: Bitcoin may perform better than stocks

If traditional economic rules also apply to the cryptocurrency market, the current market seems to be conducive to the rise of Bitcoin prices. If the Fed returns to its monetary easing policy, the most likely reason is that the stock market continues to fall. However, once the Fed does so, it will also benefit digital currencies.

In the fourth quarter of 2021, U.S. Treasury bond yields declined, which may indicate that stock market returns in 2022 will tend to normalize. If the S&P 500 Index falls back and stays down for a period of time, then Bitcoin may rise before bonds and gold. But it should be noted that among the three of Bitcoin, bonds and gold, Bitcoin has the highest volatility. At the beginning of 2022, risky assets including Bitcoin, bonds and gold may be affected by Fed policy.

Below: Cryptocurrency may be an early market warning signal

The first Bloomberg crypto outlook in 2022: Bitcoin may perform better than stocks

Now, in the field of speculative trading, currency encryption seems to be the investment of choice for those who, therefore encryption currency market is already early signs of the market’s decline. For example, the time of Dogecoin and Shiba Inu peaks coincides with the time of market highs.

Fundamentals of the crypto market in 2022

In 2022, Bitcoin’s fundamentals depend on the reset of computing power in 2021. At present, Bitcoin has recovered from the hashrate crash and price collapse in 2021. On the whole, the fundamentals of Bitcoin in early 2022 are not bad. The Bitcoin price on January 5, 2022 is roughly the same as the Bitcoin price in February 2021. As Bloomberg Intelligence has seen, the Bitcoin bull market is more consolidated and may resume its upward trajectory.

Will the price of Bitcoin increase 10 times? In 2021, Bitcoin has withstood an unprecedented plunge. With the recovery of computing power, the fundamentals of Bitcoin do not seem to have been affected much, which will also help to further consolidate the price fundamentals in 2022. Here is a data analogy. In 2018, the 10-day average of Bitcoin’s computing power dropped by 30%. At that time, the price of Bitcoin bottomed to the range of $3,000. According to Coinmetrics data, Bitcoin’s entire network’s computing power also appeared by 50% in 2021. In this year, the price of Bitcoin fell from $60,000 to $30,000.

Below: Bitcoin fell to the $30,000 range in 2021, similar to 2018 when it fell to $3,000.

The first Bloomberg crypto outlook in 2022: Bitcoin may perform better than stocks

However, similar to 2018, Bloomberg Intelligence believes that the collapse of the entire network’s computing power in 2021 will further consolidate the price foundation of Bitcoin. At present, most of the Bitcoin mining activities have been transferred to the North American market, and most of the mining companies are listed companies, many of which are more inclined to hold bitcoins rather than sell bitcoins. Those investors who invest in mining listed companies on the stock market are equivalent to indirect exposure to cryptocurrencies.

Investors are accelerating the accumulation of Bitcoin. In the digital world, due to limited supply, Bitcoin plays the role of a benchmark encrypted asset. BitcoinTreasuries disclosed the holdings of Bitcoin by leading companies. Among the top five, there are listed technology companies such as Tesla and MicroStrategy, as well as mining machine companies. In 2021, encrypted assets have completed a paradigm shift, and the industry has become increasingly mature.

Below: More and more listed companies include Bitcoin in their investment portfolios

The first Bloomberg crypto outlook in 2022: Bitcoin may perform better than stocks

In 2021, Bitcoin encountered many challenges, but in the end Bitcoin overcame the obstacles and gained a firm foothold.

Why does the Bitcoin bull market appear to be “complex”? Frankly speaking, Bitcoin was originally a risky asset, but as the world changes, it is evolving into a digital reserve asset, which has a positive impact on its price. It is still in the early stages of Bitcoin demand and adoption rates are rising, but the supply is declining. The key question at the beginning of 2022 is whether Bitcoin is too hot. According to the analysis chart of Bloomberg Intelligence, the reasonable price of Bitcoin may be above the 50-week moving average price.

Below: Bitcoin still seems to have a relatively stable bull market.

The first Bloomberg crypto outlook in 2022: Bitcoin may perform better than stocks

In the past year, the price of Bitcoin has risen a bit faster. Currently, supported by favorable demand and supply fundamentals, Bitcoin’s resistance level should be around $100,000.

Three cryptographic backbones-Bitcoin, Ethereum, U.S. dollar

Bitcoin, Ethereum, and the U.S. dollar are the “Three Musketeers” in the crypto industry. Crypto assets are a model of global free market capitalism, and the biggest winner is the U.S. dollar. If the past pattern repeats itself, mainstream Bitcoin, Ethereum and stablecoins are still expected to remain at the top of the crypto ecosystem, but now there are approximately 16,000 competitors vying for speculative leadership. Compared with a year ago, Binance Coin and Solana replaced Litecoin and XRP position among the ranks to head the encryption currency.

The three top cryptocurrencies are still: Bitcoin, Ethereum and Tether. The issuance of stablecoins continues to increase, Bitcoin is becoming a general collateral, and Ethereum is becoming a platform for DeFi , financial technology and NFT . According to Coinmarketcap data, the three top cryptocurrencies are still: Bitcoin, Ethereum and Tether. It is worth noting that the issuance and popularity of stablecoins have increased rapidly, among which Tether has always maintained a dominant position, which also shows the importance of the U.S. dollar in the crypto ecosystem, especially the transaction demand of the U.S. dollar exceeds that of all other legal currencies. Trading volume.

Below: Tether, Ethereum and Bitcoin vs. 16,000 other cryptocurrencies

The first Bloomberg crypto outlook in 2022: Bitcoin may perform better than stocks

Almost nothing can prevent Bitcoin from becoming a global digital reserve asset, and the status of Ethereum has not been shaken by the so-called “Ethereum killer”. On the other hand, the number of types of cryptocurrencies has grown substantially in 2021, from about 8,000 a year ago to 16,000.

Has anything changed in the top cryptocurrency ranks? According to Coinmarketcap data (as shown in the figure below), a year ago Litecoin and XRP were still the top five cryptocurrencies (as shown in the figure below), but they fell to 22nd and 8th respectively a year later. This phenomenon shows that there is still a lot of speculation in the crypto market. Fortunately, the top three top cryptocurrencies have not changed, and they are still Bitcoin, Ethereum and Tether.

The first Bloomberg crypto outlook in 2022: Bitcoin may perform better than stocks

Typical examples of speculative currency encryption: the first half of 2021 was the dog coins , the second half of 2021 is a Shiba Inu.

Stablecoins continue to expand. The expansion speed of stablecoins does not seem to slow down, which is also a main reason for the continued appreciation of the entire digital asset market. In addition, as the speed of technological development becomes faster and faster, stablecoins will also encounter regulatory constraints and market obstacles. This is a normal phenomenon.

Below: Among the top digital assets, stablecoins continue to maintain a bull market state

The first Bloomberg crypto outlook in 2022: Bitcoin may perform better than stocks

However, stablecoins will also encounter some challenges, such as central bank digital currencies. The above chart shows the rising trend of stablecoins and their comparison with Bitcoin and Ethereum.

Bitcoin vs. Gold vs. Silver, stocks

Bitcoin will overturn gold, just as gold overturns silver. Compared with most asset classes, Bitcoin’s volatility is gradually decreasing, so we may see funds flow out of gold and then into cryptocurrencies such as Bitcoin.

As an investment target, can Bitcoin replace gold? The impact of Bitcoin on gold may be almost impossible to stop, just like the impact of gold on silver. In 2017, the price of Bitcoin in USD exceeded the value of an ounce of gold, after which people began to take Bitcoin seriously, and this trend seems to be more and more persistent. Bloomberg Intelligence’s chart depicts the rising trajectory of the Bitcoin-Gold ratio in early 2022. It has reached 25 times, compared with 18 times a year ago. Obviously, gold seems to be being replaced by Bitcoin. As of January 5, the total amount of gold held by exchange- traded funds has fallen by about 9% year-on-year-the numbers prove this.

Below: Bitcoin beats gold, maybe it’s just a matter of time

The first Bloomberg crypto outlook in 2022: Bitcoin may perform better than stocks

Gold may rise to $2,000 per ounce in 2022, but Bitcoin should be able to rise at a faster rate.

Compared with the stock market, Bitcoin still has the upper hand. The Bloomberg Intelligence chart depicts the rising trajectory of Bitcoin prices in the past year. Compared with the Nasdaq 100 stock index, Bitcoin volatility has now begun to decline. At the beginning of 2022, the 260-day volatility of Bitcoin is about 4 times that of the Nasdaq volatility. In 2013, this indicator was about 12 times and in 2017 it was 8 times.

Below: Compared with most assets, Bitcoin’s volatility is becoming lower and lower

The first Bloomberg crypto outlook in 2022: Bitcoin may perform better than stocks

The Fed may face the biggest inflation crisis in four decades. Compared with stocks, Bitcoin’s relative risk indicators are likely to continue to decline.

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