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When will the crypto market go up in 2022? This is a question that many investors are asking as the market has been bearish for the past few years. While there is no certain answer, there are a few factors that could lead to an upturn in the market.
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Introduction
While it is impossible to accurately predict the future of the cryptocurrency market, there are certain factors that can give us a general idea as to when the market might start to go up again. For example, institutional investors have recently begun to show more interest in cryptocurrency, which could lead to more mainstream adoption and higher prices. Additionally, the halving event that is scheduled to occur in May of 2020 could also lead to an increase in prices as it did in 2016.
Factors That Contributed to the Decline in Cryptocurrency Prices in 2018
Bitcoin, the largest cryptocurrency by market capitalization, plunged more than 50 percent in value in 2018. Ethereum, the second-largest cryptocurrency, fell more than 70 percent. The prices of other major cryptocurrencies also declined sharply. The declines were caused by a combination of factors, including regulatory uncertainty, hacks, and market manipulation.
The ICO Market Dried Up
One reason for the decline in cryptocurrency prices in 2018 was the ICO market dried up. In 2017, ICOs were all the rage and they were a big source of demand for cryptocurrencies. But, in 2018, the ICO market significantly cooled down and this took away a big source of demand for cryptocurrencies.
Bitcoin Forks
Bitcoin forks are a type of cryptocurrency split that occurs when a blockchain diverges into two potential paths. Forks can happen on any type of cryptocurrency, but they’re most common with Bitcoin. A fork creates a new, parallel version of the cryptocurrency’s software that invalidates transactions on the old software. This can happen for a variety of reasons, such as a change in the cryptocurrency’s protocol or an increasing number of users trying to use the old software simultaneously.
Forks can also be caused by hacker attacks, as was the case with Ethereum Classic and Ethereum in 2016. In these instances, the fork is usually done in an attempt to reverse the effects of the attack and return the stolen funds to their rightful owners.
While forks can be caused by different things, they all have one thing in common: they result in two different versions of the currency’s software (and sometimes two different currencies). This can often lead to confusion and debate among users as to which version is the “true” version of the currency.
In some cases, such as with Bitcoin Cash and Bitcoin SV, the two versions of the currency end up being very different from each other, with different goals and philosophies. This can lead to serious disagreements between members of the community and can even result in violence, as was seen with Bitcoin Cash in 2018.
In other cases, such as with Ethereum Classic and Ethereum, both versions of the currency remain fairly similar to each other and there is no real rivalry between them. However, even in these cases, there can still be debate about which version is the “true” version of the currency.
The forks that have occurred within the cryptocurrency community have often led to sharp declines in prices for all cryptocurrencies, not just the one that was forked. This is because forks tend to create uncertainty and confusion among investors, leading them to sell their assets in order to avoid losses.
The decline in prices that occurred in 2018 was likely due in part to the number of forks that took place during that year. Some notable examples include:
-Bitcoin Cash fork: In November 2018, Bitcoin Cash underwent a hard fork that resulted in two different currencies: Bitcoin Cash ABC (BCH) and Bitcoin Cash SV (BSV). The fork was controversial and led to months of infighting within the Bitcoin Cash community. The price of BCH fell from around $830 on November 15th to around $60 on December 15th. BSV also saw a similar decline, falling from around $430 on November 15th to around $80 on December 15th.
-Ethereum Classic fork: In January 2019, Ethereum Classic underwent a hard fork that resulted in two different currencies: Ethereum Classic (ETC) and Callisto Network (CLO). The fork was relatively smooth compared to other recent forks and there was little disagreement within the community about which chain should be considered “the true Ethereum Classic”. However, prices for both ETC and CLO fell sharply after the fork due to investor uncertainty. ETC fell from around $18 on January 4th to around $9 on February 4th while CLO fell from around $1 on January 4th to below $0.50 by February 4th
Regulatory Uncertainty
In 2018, regulatory uncertainty was one of the main factors that contributed to the decline in cryptocurrency prices. In June of that year, the US Securities and Exchange Commission (SEC) published a report that warned investors about the risks associated with investing in digital assets. The SEC’s report came after the prices of cryptocurrencies had already started to decline. This added to the selling pressure and increased investor anxiety.
Another factor that contributed to the decline in cryptocurrency prices was the hacks of exchanges. In July, Japanese exchange Coincheck was hacked and lost more than $500 million worth of digital assets. This was one of the largest hacks in the history of cryptocurrencies and it raised concerns about the security of exchanges.
In September, another Japanese exchange, Zaif, was hacked and lost $60 million worth of digital assets. These hacks made investors worried about investing in digital assets and contributed to the decline in prices.
The last factor that contributed to the decline in cryptocurrency prices was the launch of Bitcoin futures by US exchanges in December. The launch of Bitcoin futures by CME Group and CBOE created further selling pressure as investors hedged their positions against a fall in prices.
What Does the Future Hold for Cryptocurrencies?
Cryptocurrencies have been around for over a decade now, and they have become more popular in recent years. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Since then, many other cryptocurrencies have been created. Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control.
Increased Institutional Adoption
There are many reasons to believe that the cryptocurrency market will rebound in 2022. One of the most significant is the increased institutional adoption of digital assets.
In 2020, we saw major corporations like Square and PayPal begin to allow their customers to purchase and use Bitcoin. We also saw several high-profile investors, like hedge fund manager Paul Tudor Jones, announce that they had put part of their portfolio into BTC.
These institutional investors bring both legitimacy and capital to the crypto market. As more institutions enter the space, we believe that the market will continue to grow, leading to an increase in prices.
Improved Scalability
Each cryptocurrency is designed with a certain purpose in mind. Bitcoin, for example, was created to function as a decentralized peer-to-peer electronic cash system. Ethereum was designed to be a decentralized platform that runs smart contracts. However, no matter what the intended purpose of a cryptocurrency is, they all share one common goal – to become more widely adopted and accepted by the masses.
In order for cryptocurrencies to achieve mass adoption, they need to be able to scale. Scalability refers to a blockchain’s ability to handle an increasing number of transactions per second as more users adopt the cryptocurrency. Currently, many cryptocurrencies are not able to scale effectively due to their limited block sizes. This results in high transaction fees and slow transaction times during periods of high network usage.
One solution that has been proposed to address the scalability issue is called sharding. With sharding, the blockchain is divided into multiple shards, each of which processes a different subset of transactions. This would allow the network to process more transactions per second without sacrificing decentralization or security.
Sharding is just one of many possible solutions that are being developed to improve the scalability of cryptocurrencies. Others include off-chain scaling solutions such as Lightning Network and Liquid Network. The cryptocurrency community will need to continue working on these scalability issues if they want cryptocurrencies to be widely adopted by the mainstream population.
Mainstream Acceptance
Cryptocurrencies have come a long way since their inception over a decade ago, but they have yet to achieve mainstream acceptance. While there are more than 8,000 different cryptocurrencies in circulation today, only a handful are used regularly. Bitcoin, Ethereum, and Litecoin are the most well-known and widely accepted cryptocurrencies, but even they are not used as often as traditional fiat currencies.
This is beginning to change, however, as more and more businesses start to accept cryptocurrencies as payment. In 2020, Tesla announced that it would accept Bitcoin as payment for its electric vehicles, and Square started allowing its customers to buy and sell Bitcoin through its Cash App. These are just two examples of the growing mainstream acceptance of cryptocurrencies.
As more businesses start to accept cryptocurrencies and more people begin using them for everyday transactions, the demand for these digital assets will increase. This will likely lead to an increase in prices, which is why many experts believe that the crypto market will rebound in 2022.
