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Crypto in 2022: What Can We Expect?

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Crypto in 2022: What Can We Expect?

A Fact-Based Assessment of Next Year's Outlook

Oliver Grah
Dec 24, 2021
16
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Crypto in 2022: What Can We Expect?

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Introduction

The last few weeks in the crypto markets haven’t been particularly fun – unless you were prepared for this correction and enjoy the arduous task of seeing through the noise and “embrace the chop.”

Whether the recent price moves have you stressed or you can sit back and enjoy the holidays, today, we try to gather reasons why one can (or should) still be bullish on the crypto space going into next year.

A short disclaimer: While we always try to stick to the data and our best estimations, it’s nonetheless essential to take all charts, fractals, models, and forecasts with a grain of salt. After all, any information should only serve as pieces of a larger puzzle to form your own investing framework!

2021 Has Been a Crazy Year

2021 has truly been an astonishing year for the crypto space! It started with Bitcoin blasting off to new all-time highs at the beginning of the year. We then witnessed an altcoin explosion of biblical proportions.

Many people’s lives were transformed in the weeks and months of raging bullishness, especially in the early but also in the later bullish stages of the year. Just look at the exponential growth the total crypto market cap has experienced this year and compare it to the – now tiny looking – peak in 2017…

Source: Statista

Alongside the explosive price growth, we have seen amazing new technologies emerge, and crypto has finally begun to deliver more utility thanks to DeFi and NFTs. While many of these use cases are still in their infancy and only scratch the surface of their potential, the world has now witnessed the transformative potential of blockchain technology.

While at some point, prices always overshoot fundamentals – creating the typical boom and bust cycles of an adoption S-curve – and technology needs more time to develop than the crypto enthusiasts would like, we have to acknowledge how far the space has come this year.

Twitter avatar for @santiagoroel
Santa-iago R Santos | #9159 🦇🔊⚡️ @santiagoroel
One of the hardest things in crypto is that what you think may happen in 10 years can happen in 1 year. Managing thru that has been one of the hardest and biggest learnings for me
9:53 PM ∙ Dec 22, 2021
129Likes12Retweets

Where Is the Crypto Market at Right Now?

So, where is the crypto market standing right now? After the nerve-wracking summer correction, we experienced renewed bullishness and altcoin mania in October and November, followed by another abrupt correction that caught many investors off guard.

When this recent correction began, the consensus remained for quite a while that this was only going to be a correction before continuation of the bull market. However, as of late, the voices calling for a bear market have become more prevalent. Now that we are a couple of weeks into this correction, the question is: Where are we going from here?

Since there is a lot to elaborate on to answer this question, let’s summarize the most important points for both the bullish and bearish case. Let’s start with the bears:

  • The recent price drawdown has “broken” Plan B’s Stock-to-Flow prediction – at least temporarily. At the same time, we can no longer refer back to the bull markets of 2013 and 2017 to justify the intactness of the current bull market structure.

  • With the Fed reversing its “easy money policy” of the last two years, a significant catalyst for the current global asset bull market is fading away. Although we do not need to paint doomsday scenarios, we can agree that the next few months will bring some levels of uncertainty.

Twitter avatar for @_Checkmatey_
_Checkmate.btc 🔑⚡🦬🌋checkonchain.com🌋 @_Checkmatey_
This is a fascinating chart plotting the correlation between $BTC and $SPX. For years it traded as a largely uncorrelated between +-0.1. Then March 2020 started and fiat debasement on steroids created our new regime where everything is up only forever...Laura...
Image
2:07 AM ∙ Dec 16, 2021
145Likes15Retweets
  • Another “bear market argument” is that many altcoins have experienced price gains that exceed their fundamental achievements by a long shot. On top of that, speculation has become so rampant that VCs and retail investors are throwing money at everything that hits certain narratives (often without doing their due diligence). This is typical for the later stages of a mania phase (aka bubble).

Now it's the bulls' turn:

  • From a technical analysis perspective, Bitcoin and several altcoins have not yet broken their bullish structure on the weekly time frame. If critical price levels don’t break (e.g., $40k for BTC), we can argue that we are currently experiencing a standard 30 % bull market correction.

    Twitter avatar for @woonomic
    Willy Woo @woonomic
    Institutional sell-off to book in profits complete. January sees capital redeployment. Holiday season is now retail only. Sophisticated traders building long positions on calendar futures. Holders holding the line on-chain. Happy Holiday season everyone.
    3:59 PM ∙ Dec 23, 2021
    2,550Likes312Retweets
  • Another sign that makes it rather unlikely that we have entered a prolonged bear market is that we see many fundamentally strong projects perform very strongly in this current uncertain market environment – some have even printed new all-time highs (e.g., LUNA, MATIC). This indicates that the market is still hungry for fundamentally driven growth...

  • Looking at on-chain signals, we can spot signs that differ strongly from the typical early stages of a bear market: Long-term holders are NOT looking for the exit as they did in 2013 and 2017. Also, we can observe the continuous growth of illiquid supply, meaning that a supply squeeze like we experienced this summer is becoming a likely outcome.

Twitter avatar for @WClementeIII
Will Clemente @WClementeIII
Would be pretty funny to me if this bullish divergence plays out like the last two. Just watching price action to confirm that it is playing out. Patience is key.
Image
2:50 PM ∙ Dec 18, 2021
5,945Likes818Retweets
Twitter avatar for @glassnode
glassnode @glassnode
#Bitcoin supply is moving from a Liquid, to Illiquid state at a rate of 100k $BTC per mth. Illiquid coins are those sent to an address with little history of spending, generally associated with investor accumulation, and bull market buyers. Live Chart: glassno.de/3EhUPTo
Image
11:05 PM ∙ Dec 21, 2021
1,752Likes382Retweets
  • The fact that Bitcoin has clearly broken prior bull market structures can also be interpreted positively: The theory of lengthening cycles is now clearly in the cards!

    Twitter avatar for @intocryptoverse
    Benjamin Cowen @intocryptoverse
    #Bitcoin not having a blow-off top in Q4 2021 is more or less the expectation, in line with the idea that the market cycles lengthen. The fact that people are fearful at a <$50k #Bitcoin only makes me more bullish for 2022.
    Image
    10:40 PM ∙ Dec 21, 2021
    2,397Likes250Retweets
  • Looking a bit further ahead, we can state that fundamentally, there still seems to be a lot of gas in the tank for continued crypto adoption and growth in the months and years ahead. In contrast to the bear market of 2018 and 2019, we now have many working products and compelling use cases (e.g., DeFi, NFTs, gaming, etc.). Innovation and project releases will not slow down but will accelerate in 2022.

Narratives to Watch in 2022

So, looking ahead to 2022, what will likely be the narratives and sectors that will experience growth – irrespective of whether the crypto market more broadly remains in an explosive bull market or not? Well, here are our best guesses:

  • The ETH Merge: It’s clearly one of the most anticipated stepping stones for the entire crypto space, seeing Ethereum finally move from Proof of Work to Proof of Stake. This step is not just critical to pave the way for increased scalability of Ethereum, but we can also assume that the “ESG-narrative” of Ethereum innovating and becoming more climate-friendly (than Bitcoin) will generate a lot of hype, especially among mainstream and institutional investors.

    Twitter avatar for @CryptoGucci
    Crypto Gucci 🦇🔊| crypto-gucci.eth @CryptoGucci
    If EIP-1559 was the appetizer Then the #Ethereum 2.0 merge will be the main course Once the merge goes live there will be an ~90% reduction in issuance which will bring a supply side liquidity crisis like you’ve never seen Translation: $ETH is going to 20k sooner than later
    3:04 PM ∙ Dec 21, 2021
    260Likes48Retweets
  • L2: As we have expressed many times recently, a major trend of 2022 will be Ethereum L2s. While we have started to see some of them rolling out in recent months, we still haven’t reached the tipping point of L2 adoption. Having a close eye on emerging L2 solutions and their adoption will be crucial for crypto investors going into the new year.

Twitter avatar for @antiprosynth
antiprosynthesis.eth ⟠ @antiprosynth
@CryptoEsq_ Try @zksync @arbitrum @optimismPBC ... some time. L2 is alive and kicking.
12:43 PM ∙ Dec 21, 2021
  • Gaming & the Metaverse: What we have witnessed in the summer and fall of this year was nothing less than the spectacular rise of NFTs, gaming, and the Metaverse, with massive price appreciation catapulting this sector into the center of attention. While the fast rise naturally led to a substantial correction in recent weeks, this trend is far from being over. With many games and Metaverse projects only really starting to deliver on their promises in 2022, we can expect fireworks in the projects that actually ship amazing things.

Twitter avatar for @elliotrades
EllioTrades @elliotrades
This first metaverse run was the equivalent of BTC in 2011 People think they get it, but they have no idea how big it will be.
3:52 AM ∙ Dec 23, 2021
3,952Likes601Retweets
  • Cardano & Polkadot Ecosystems: While it has become relatively quiet around Cardano and Polkadot in recent weeks, investors shouldn’t turn away from these ecosystems – especially not now that they are close to actually entering production. Both Polkadot and Cardano are rolling out their first applications in the weeks and months ahead, and it might be wise to have an eye on these two ecosystems before they blow up.

Twitter avatar for @InputOutputHK
Input Output @InputOutputHK
A constellation of projects building on #Cardano will begin to launch, first on testnet then mainnet. These will only increase, with tens of thousands (and in time, hundreds of thousands) of new users coming to Cardano over the coming months. 2/n
3:07 PM ∙ Dec 21, 2021
188Likes13Retweets
Twitter avatar for @Polkadot
Polkadot @Polkadot
On Dec 18 history was made when the first five auction-winning parachains were onboarded to Polkadot. This marked a remarkable milestone reached by the Polkadot network – delivering the final piece of functionality to achieve the vision of Polkadot as outlined in the whitepaper.
7:58 AM ∙ Dec 22, 2021
1,233Likes198Retweets

What about Bitcoin and its “digital gold” narrative going into 2022? Well, there are several considerations to be made:

In contrast to Ethereum and many altcoins, which incorporate the innovative aspect of crypto, Bitcoin is highly reliant on its monetary use case as a store of value. Consequentially, Bitcoin is – more than any other crypto asset – reliant on the macro environment.

Here comes the catch: 2022 could bring quite some headwinds from a macro perspective with central bank liquidity drying up, at least until something “breaks” in asset markets or the economy and central banks are forced to reverse again.

It will depend on whether central banks achieve the balancing act of removing monetary stimulus without upsetting asset markets. So, the mid-term outlook (let’s say the next 3-6 months) could entail quite some uncertainty for Bitcoin’s digital gold narrative.

Some Tips To Navigate the Market in 2022

We have laid out a solid case for remaining generally bullish on the crypto space in 2022. However, with 2020 and 2021 already having delivered massive price gains, we have to be more prudent and selective when investing going into the next year.

It really boils down to whether you believe that we are still in the midst of a massive bull market, we have just entered a bear market, or whether we have to throw the cycle theories overboard altogether, assessing the market on a rolling basis – looking at fundamental catalysts, on-chain analysis, and macro drivers.

Here are a few more tips to think about before we soon conclude this year:

Twitter avatar for @TraderMagus
Magus @TraderMagus
One of the most valueable skill sets in the modern world is the ability to take in and decern information. To filter out 98% of the noise down to what matters. Only the top can hear logic that contradicts their current ideas and say to themselves "maybe I'm wrong"
1:20 PM ∙ Dec 18, 2021
414Likes86Retweets
Twitter avatar for @screentimes
ciniz 👁 @screentimes
after going from $1,200 (initial investment from my tax returns) to over 10 figures in just over three years, here are the things i wish someone had told me The Secrets About Web3 The VCs Don’t Want YOU (the little guy) To Know - a thread 🧵👇
5:50 AM ∙ Dec 23, 2021
775Likes178Retweets
Twitter avatar for @screentimes
ciniz 👁 @screentimes
being an early participant is the easiest way to make life changing returns you do not need to be an expert, you just need to be as early as the experts or earlier than most it is always early somewhere
5:50 AM ∙ Dec 23, 2021
198Likes7Retweets
Twitter avatar for @screentimes
ciniz 👁 @screentimes
selling is like sleeping = you need it. often. religiously stablecoins will help you survive the five year bear market that whales know is coming you may think that your bags are better than everyone else’s bags, but you will be surprised by the extend of the dump
5:50 AM ∙ Dec 23, 2021
162Likes10Retweets
Twitter avatar for @screentimes
ciniz 👁 @screentimes
respecting the dump is the most important part of the market cycle long term investors are created, devs get to buidl the next wave of incredibly powerful gambling tools and majority of “devs do something” anons cease to exist
5:50 AM ∙ Dec 23, 2021
131Likes7Retweets
Twitter avatar for @screentimes
ciniz 👁 @screentimes
learn to be compassionate with people who hate NFTs unfortunately, god didn’t make all of us equally smart some people need more time to understand technology that will improve billions of lives same happened with smart phones, computers and software change takes time
5:50 AM ∙ Dec 23, 2021
138Likes13Retweets
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Crypto in 2022: What Can We Expect?

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