Why Bitcoin Could Frustrate Bulls And Bears In 2022
Bitcoin has been on a downtrend for the past days recording a 1.8% loss in 24 hours and a 10.5% correction in seven days. The benchmark crypto seems to be reacting to macro-economic factors and could see further downside in the short term.
As of press time, Bitcoin trades at $42,076 after testing the levels around $40,500. Remains to be seen if current levels will hold and if the crypto market will experience recovery or continue its downside trend into the $30,000s.
Today’s sell-off was apparently triggered by the release of the U.S. unemployment report. In December 2021 around 200,000 new jobs were added to this country’s economy, far below the expected number above 400,000.
This has increased the possibility, alongside the rise in inflation metrics for the U.S. expected to hit around 7% in the upcoming CPI reports, that the U.S. Federal Reserve will increase interest rates. Thus, creating less favorable conditions for the global market and risk assets, such as Bitcoin.
As NewsBTC reported yesterday, some experts believe risk assets could see shaky months and blood in the short to mid-term, but ultimately benefit from a rise in interest rates. Senior Commodity Strategist for Bloomberg Intelligence Mike McGlone remains confident that Bitcoin will hit $100,000 in 2022.
On a different note, Director of Global Macro for investment firm Fidelity, Jurrien Timmer, thinks Bitcoin will “frustrate” bulls and bears alike. Many of the former expect a quick bounce towards McGlone’s price target, while the latter investors are targeting $30,000 and much lower. Timmer said:
If real rates stay negative, gold and bitcoin could do well this year. But the “excess money” impulse (M2 growth less GDP growth) has all but vanished. Perhaps both gold and bitcoin will continue to frustrate bulls and bears alike by doing very little in 2022.
Timmer further explains that Bitcoin, Gold, and other assets have reacted positively to an increase in the U.S. monetary supply. As the FED attempts to implement changes in its monetary policy, BTC could underperform.
In the first half of 2021, the benchmark crypto saw an impressive rally as the FED contributed to the global increase in liquidity. BTC then moved sideways in the $30,000 to $60,000 range as the macro-economic outlook shifted. On this topic, former BitMEX CEO Arthur Hayes wrote:
Since M2% growth stalled, Bitcoin has traded sideways. If M2 is set to hit 0% — and possibly even go negative — in short order, the natural conclusion is that Bitcoin (absent any asymptotic growth in the number of users or transactions processed via the network) is likely to go much lower as well.
In any case, the 2022 outlook seems more complicated than expected and could be mined with surprises and unexpected twists.