Are Cryptocurrencies Such as Bitcoin Going to Become Less Volatile in 2022?
Bitcoin prices have certainly been on a roller coaster ride in 2021, and they’re expected to end the year considerably higher than they started.
One Bitcoin is now worth just under $49,000, a staggering 66 percent increase from January’s lows. However, the leading cryptocurrency is down about 30% from the November peak of almost $69,000.
Therefore, where does Bitcoin as well as other cryptocurrencies go from here?
Check out our forecast: Cryptocurrency Price Prediction
There’s no doubting that cryptocurrency has gained traction. Bitcoin accounts for around $920 billion of the entire value of all digital currencies in circulation, which totals more than $2.2 trillion.
Ethereum, often known as Ether, is beginning to bridge the gap. Thus, Ethereum, a famous cryptocurrency for non-fungible tokens (NFTs) and smart contracts that have swept the collectibles and art sector, has a market capitalization of $475 billion.
In 2021, the price of Ether has more than quadrupled, rising from roughly $730 to almost $4,000 per token.
Individuals can now choose from a number of Bitcoin exchange-traded funds (ETFs). ETFs that invest in other big cryptocurrencies may also be on the horizon.
Nick Elward, the head of institutional product and EFTs and senior vice president at Natixis Investment Managers, mentioned, “The next possible step is for additional ETFs for other coins to launch. There probably will be an ether ETF in early 2022.” He also added that, “There probably will be an ether ETF in early 2022.”
Cryptocurrency has attracted the attention of major institutional and expert investors, including famous fund managers Stanley Druckenmiller and George Soros. Nonetheless, the recent drop serves as a harsh reminder of how fickle Bitcoin and other cryptocurrencies might be.
Can we Expect Calmer Cryptocurrency Winters in the Future?
Numerous investors flocked into Bitcoin in 2017, and prices skyrocketed from $1,000 per coin to well under $20,000 by December.
Then followed the fall, with Bitcoin falling to approximately $3,500 by the end of the year. Those prices have certainly rebounded — and then some — however, the currency did not return to the $20,000 threshold until December 2020.
Cryptocurrency values are likely to continue to fluctuate at such a rapid pace. The trick, according to analysts, is for traders to learn to endure the unavoidable highs and lows.
The managing partner of Bitfrost (service provider for digital assets), Anton Chashchin, said that “More than once we have observed a correction in the market. If institutional investors begin to take profits, then it can cause a ripple effect.”
However, he went on to say that huge corporations are going to continue to flock to Bitcoin as a possible hedge against rising interest rates and inflation, which might harm conventional state-backed currencies.
Anton also mentioned that “Even if the source of institutional investor interest is the Fear of Missing Out (FOMO), all of the institutional decisions have been made after careful consideration. These firms have come around to the potential benefits of cryptos.”
Increased popularity and legality of cryptos are also expected to help reduce volatility. Prices may continue to fluctuate drastically, although not as dramatically as in recent years.
The president of Ava Labs, John Wu, said, “Having larger institutions with deeper pockets and steadier hands buying cryptos will help. They can withstand volatility.” Ava Labs is a blockchain firm that’s compatible with Ethereum.
Looking Past Bitcoin
Elward of Natixis Investments expects that more fund managers are going to be interested in cryptos and that they’re likely going to shift away from passively managed Bitcoin ETFs that just track the movement of Bitcoin futures. He believes that active is a more logical approach for cryptocurrency traders and that more managers are going to start analyzing these markets.
He went on to say that cryptocurrency is a natural extension of the so-called alternative investing universe, which includes gold as well as other precious metals in addition to bonds and stocks.
On that note, several analysts believe that Ethereum and Binance Coin, the third most valued crypto in the world, are going to keep gaining market share against Bitcoin.
The CEO of Nimbus Platform, Alex Lemberg, mentioned that “You have to look at the utility of cryptos. Ether could eventually be bigger than bitcoin. It’s the rails for NFT transactions.” Nimbus Platform is a decentralized financial lending corporation.