After a Phenomenal 2021, What Lies Ahead for the Crypto Pack?
In this article, we briefly look at Bitcoin’s journey last year and how it has shifted the bias about crypto in general.
14:50 12 January 2022
2021 was without a doubt a monster year for Bitcoin and the broader crypto pack. In this article we briefly look at Bitcoin’s journey last year and how it has shifted the bias about crypto in general.
Over the last few years, the crypto pack has taken us all on a wild, crazy roller coaster ride. And it had different effects on different groups of people. While the traditional investors may still be eschewing the crypto pack, particularly Bitcoin, the backers are still firm and optimistic in their stance.
In fact, Bitcoin supporters showed unwavering allegiance and remarkable patience holding their nerves through thick and thin: when the price hit the roof they resisted the urge to sell their holdings and take home the profits; and, when the markets saw a huge selling spree, they didn’t panic and held firm. And they got the results they richly deserved.
Breaching the $100000 mark
Earlier last year, speculations were rife about Bitcoin climbing up over $100000 before the end of 2021. The critics wasted no time rubbishing the hoopla surrounding the bullish claim made by Bitcoin proponents and went about their usual business picking apart the crypto pack.
The digital currency, however, did show glimpses of pulling off the impossible thanks to a mad bullish run, in which it came close to scaling the $70k summit not once but twice. In these instances, it did look like the $100k mark was about to be breached, but Bitcoin couldn’t sustain the nice momentum it worked itself into. It petered out, running out of steam eventually.
Although it did not have enough gas in the tank to conquer the much talked about $100000 mark, it did finish the year with a bang- up approximately 63% YOY. Just for context, the American S&P 500 index swelled about 27% YOY in the same period, which is far better than the 16.26% YOY gain it managed the previous period.
The Rest of the Crypto Pack Joined the Party
Riding on the Bitcoin boom, the other cryptocurrencies, stablecoins and altcoins saw their value grow astronomically, with most of these digital currencies going on to register a massive addition to their market cap. This was possible because of a huge influx of traders and investors, who believed they could make a lot of money with the crypto currencies, trading and investing in it. They thought the time was ripe for them to take the plunge. And they entered the market and gained immensely from the crazy bull run.
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More of a Speculative Asset, if anything
The world is still under the grip of the pandemic. With a well-concerted global effort, we did inch towards the path to recovery, but the slow and steady progress basically amounted to nothing with new COVID variants coming out one after another. The outbreak of Omicron, the latest variant to sweep the globe, has cast a net of uncertainty over our lives all again.
In these uncertain times, it is normal for people to look for stable investments as opposed to speculative assets like Bitcoin, stocks, and derivatives. Capital protection takes precedence during troubled times, and it is wise of people to steer clear of crypto and stock markets and other avenues dealing with speculative assets.
No surprises Bitcoin had a 20% drop early last month when the reports of the Omicron variant spreading surfaced for the first time. A large number of participants, in a knee-jerk reaction, withdrew their money from the market triggering a sharp selloff that took the price of Bitcoin below $40k and raised doubts about its short-term outlook.
Let’s understand one thing. As with any speculative asset, Bitcoin can: climb up to higher levels and surpass stiff targets even when nobody gives it a chance; drop steeply to levels it rose up from after topping out, or take its own good sweet time to give up all the gains; get into a consolidation phase where it is stuck in a range forever, like it did for a good part of three years between 2017 and 2020.
In any case, it showed great resilience regardless of all the negative talk around it collapsing and becoming zero. It inspired confidence in several retail investors and financial institutions both big and small over the years, and captured the attention of blue-chip companies and countries too. For those who don’t know, El Salvador now accepts Bitcoin as a legal tender.
Bitcoin, a Safe Haven?
True, the limited supply of Bitcoin- there can only be 21 million in circulation at any given time- has encouraged a lot of people to liken it with physical gold. But the comparison ends right there. Just like stock market assets, Bitcoin goes through its fair share of sudden downturns and proves to be a risky proposition to bet on particularly for long term investors seeking a meaningful risk-averse asset to add to their portfolio.
Is bitcoin the digital gold as it’s touted to be? We’re not sure. Getting to the bottom of that argument is beyond the scope of this article. But one thing is for sure: such sharp, wild volatile movements have clearly dented Bitcoin’s reputation as a safe haven.
What’s Next for Bitcoin and the Crypto pack?
It’s hard to say for sure which way Bitcoin will go in the short term after a sell off that resulted in a sharp drop in price. Opinion surveys suggest that the jury is divided: some say Bitcoin is headed for a higher terrain while some say Bitcoin will go off the boil after what has been a stupendous year. Is Bitcoin long due for a correction? Will Bitcoin halve or double? Will it plunge further to $30k or steady itself before it takes flight to breach the $100k psychological barrier? Only time can answer this.
Things are looking up for Ether, though. It recorded a mammoth 393% rise in 2021, clearly outperforming its crypto cousin. And the trend is likely to continue with the NFT ecosystem taking shape fuelled by a strong surge in interest from the creators of the art and gaming world. All in all, Ether looks well poised to make a mark for itself in the crypto space if it hasn’t already.
But experts think Bitcoin will be the undisputed leader of the crypto pack. Ask the critics for their opinion, and they’ll harp on the same old point of contention that bitcoin has no intrinsic value and is just one fall away from hitting the rock bottom. Regardless, the crypto juggernaut keeps rolling, led by the brilliant Bitcoin.