- Bitcoin is on a knife edge regarding its next move
- There are strong arguments on both sides of the bullish/bearish argument with regard to Bitcoin in 2022
- What are the reasons offered by both sides?
Bitcoin is on something of a knife edge regarding what will happen in 2022, with bullish and bearish arguments being frequently aired on crypto Twitter. Both sides make good points, and of course no one knows what will happen, but what are the key reasons behind the calls on both sides? We look at the rationale behind bullish and bearish outlooks for Bitcoin in 2022 and give our verdict.
Bulls Look to Price Action and Expanded Cycles
The argument for a 2022 bull run comes from the way Bitcoin is positioned right now, as well as the expanding cycles theory (not to be confused with the super cycle theory). Bitcoin has experienced two corrections this bull run, a 53% correction in May-July and a 39% correction from November to December. Assuming the current correction doesn’t go any further, such corrections are typical in a Bitcoin bull run and something we have seen time and time again.
As well as the notional fact that Bitcoin sees such corrections in a bull run, assuming Bitcoin doesn’t drop any further it is well set for a further rise in 2022. An upward trendline stretching back to 2012 is still intact, and the fact is that Bitcoin simply is not behaving as if it were in a bear market.
Alongside this is the theory that the typical 4-year cycle that Bitcoin has largely been enjoying to date is going to end due to Bitcoin’s growth as an asset. Bitcoin is now valued at some trillion dollars, and it takes much more volume to move the market compared to the past. This means that bull runs will be longer and less violent over time, which could start to be played out in 2022.
Fundamentally, with other countries thought to be considering adopting Bitcoin as a currency and institutional adoption steadily growing, the desire to own Bitcoin could expand into 2022.
Bitcoin Bears Point to Monetary Policy and Lack of Runway
The bearish argument for Bitcoin in 2022 also comes through two schools of thought. Firstly there is the fact that Bitcoin has enjoyed a remarkable bull run since collapsing in March 2020, putting on 1,870% in just 18 months. The entire crypto market has grown from $112 billion in March 2020 to $3 trillion this year, so, in the most basic terms, is there any growth left? It would be completely reasonable to think that such an incredible return marks the end of the bull run, and few could have any complaints if it did.
The other reason why the party could be over is the actions of world banks, particularly the federal reserve. The Fed announced last week that it was going to cut back on money printing next year and raise interest rates, making a return to dollar-based investments more attractive. This hasn’t been the case for almost two years.
A recent rally in the value of the dollar also points to a bearish 2022 for Bitcoin, with institutions preferring to de-risk and let the dollar do the work for them, meaning Bitcoin is a less desirable investment.
FullyCrypto Leans Bearish
We would love to be bullish going into 2022, but with the bull run having already seen massive gains and the world beginning to de-risk next year, we think it’s more likely that 2022 will be bearish for Bitcoin. There may be one more rally in Q1 of next year, but we can’t help thinking that the good times are almost over for this bull run.
If this were to play out we would likely see a bear market between 2022-2024 and then another cycle beginning in 2025 after the 2024 halving.