20k Price Prediction for Bitcoin in 2022
2021 was an excellent year for Bitcoin. Frequent news of Bitcoin breaking its all time high has turned most skeptics into enthusiastic supporters of Bitcoin. After a full year of steep ascending the price hill, Bitcoin seems to be taking a breather with sideways trading of 39,000 USD at the time of this writing. Will this sideways trading propel Bitcoin into a new high, or will it break its sideway formation and trend lower?
There are a lot of bullish and bearish talks about the future of Bitcoin.
The Bulls believe that:
1) The underlying proof-of-work technology that powered Bitcoin is superior.
2) Bitcoin, being digital gold, has similar inflation hedging characteristics to physical gold.
3) Countries like El Salvator and the Central African Republic have adopted Bitcoin as their official currency; thus, Bitcoin has valid use cases.
The Bears believe that:
1) Bitcoin price actions positively correlate with the Nasdaq; thus, it has similar price action to tech stocks rather than physical gold.
2) Bitcoin has never been tested in a high inflationary environment, let alone with a tightening of monetary policy.
3) Only government can issue currency, be it physical or digital.
Let says the very reason for the existence of Bitcoin is due to its technological superiority in comparison to the existing financial institution, then it does have the characteristics of a tech stock. Traditionally, tech stocks do not fare well in a high inflationary environment due to macro factors such as higher business costs and a slowdown in consumer spending to sustain their continuous business growth. In addition, any tightening of monetary policy is equivalent to the sucking of money out of the economy, thus making your dollar more attractive than a high-risk, high volatile, and untested Bitcoin. Given these, I don’t foresee Bitcoin holding its ground in the near future.
The arguments for the Bulls and Bears on point 3 are both valid. In our modern monetary system, fiat money isn’t backed by physical goods or commodities but by the people’s faith in their government. Hence, theoretically, the government can replace fiat money with cryptocurrency if the people’s faith remains unchanged. On the other hand, like a double edge sword, the very same government has the power to stiffen Bitcoin’s growth. Personally, I believe government regulations are coming, whether we like it or not, and they might not be ominous as others think. The Internet, Web 2.0 that we know today is a fine example of government regulations bringing stability into the once messy Web 1.0 era.
Upon weighing the pros and cons of both bulls’ and bears’ arguments, I lean toward a positive long-term prospect coupled with a short-term negative outlook for Bitcoin, and the year 2022 might not only be a tumultuous year for Bitcoin but all assets’ classes.
Disclaimer: The information contained in this article is not legal or investment advice and it represents my personal views and, as always, “Do Your Own Research.”
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