Zuger Partners AG
General Forecast for the Crypto Market in 2022
At the beginning of January, the price of BTC is over USD 42,000.
After our latest forecasts from November were fulfilled by year’s end, our price expectations and the market have undergone severe corrections from the highs. It seems that we are embarking on a new period during which the price of BTC may continue to trend erratically in the short term with a clear bottom of above $35-40k. This period is expected to continue until the Chinese New Year of the Tiger.
We began last year with the expectation that the BTC bull-run could reach $75k, and some analysts thought it would even exceed $100k. In that analysis from early 2021, it was clear to us that the price would exceed the range of 45-55k. It finally did, and the price reached its maximum of 69k in November and then began to correct, when one part of the market was maintaining growth expectations that were decoupled from those of the other.
We believe that we need to take some milestones into account for the 2022 forecast of the crypto market in general:
The capitalization of BTC has reached $1T, and the crypto market in general has reached $ 2.2T.
Bitcoin has been driven by institutional trading, to the detriment of the small investor.
The holders are continuing to accumulate.
The institutional adoption of BTC that began in 2021 will continue throughout 2022.
Institutional adoption means that we have to reread and analyze the metrics in a different way. The BTC cycle is changing.
The arrival of paper to BTC. The great diversity of derivative products entails a distribution of the capital allocated to BTC.
Mass adoption of DLT technology.
Network security (Hash Rate) is at an all-time high.
The increase in volume prevents the repetition of movements as parabolic as those we saw during previous cycles.
The increase in interest rates will be higher and faster than expected, first in the United States and then in Europe.
Indicators of recession and persistent inflation will drive fear into the markets in the coming months, rendering them particularly unstable and more volatile.
Last quarter’s decline in consumer confidence regarding the future will continue in 2022.
Bitcoin "hashrate" drops after Kazakhstan internet shutdown 5-I-22 (Country accounted in Aug. for 18% of global bitcoin output power).
The consolidation of BTC as an anti-inflationary investment similar to gold.
The birth and consolidation of new decentralized ecosystems, particularly those focused on institutions.
The consolidation of the rest of the altcoins indicates that BTC will lose its dominance in the overall market to the detriment of new sectors (Metaverse, NFTs, decentralized finance for institutions...)
The next BTC halving is still far off, in May of 2024.
With these milestones on the horizon, we believe that expectations for the price of BTC in 2022 will be in the range of between 35 and 65k, not very different from last year, but with less potential for revalorization, and much more affected by turbulence resulting from the macroeconomic situation. The above effects will drive a progressive correlation of BTC and the crypto market with traditional finance. Only a cumulative factor of strong indicators to the contrary could change this trend.
On the other hand, we expected that 2022 would bring more opportunities to the crypto market in general. The market will be growing and diversifying more and more extensively, with new and interesting ecosystems supported by new cryptos that will have to demonstrate their usability, scalability, security and great potential for revaluation. Decentralized finance is here to stay.
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