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The 2022 year started and we are exploring what makes a bull market and what a bear market, and how extreme it can be this year. In this article, we go through the reasons why prices will rise in 2022.
We take up the technical argument from the last post: the double top. A real double top is considered by analysts to be an extremely negative signal. But one can also read the double-top formation optimistically.
Investopedia illustrates this using Netflix stock as an example. It double-topped, a double top – and the price went up significantly after that. The whole point is whether a double-top is real. It is only “when the price falls below a support level that is equal to or lower than the low between the highs”. While a true double top is extremely bearish, a fake double top can exude optimism.
For Bitcoin, the support line is around $ 28,000 and is therefore still very far away from the current price. As long as prices don’t fall significantly lower, the double top could also be a very bullish signal.
In the case of ether, one would have to ask whether there is even a candidate for a double top. The second peak, at more than $4,800, was significantly higher than the first at EUR 4,400. Here one could even see an unchecked bull market with higher highs and lower lows.
The big players – the strong hands – continue to hold or are still accumulating.
Microstrategy, Tesla, Galaxy Digital, Voyager, Marathon, Square, Block One, Tezos, Stone Rich, Grayscale, CoinShares, Purpose, 3iQ, Bitwise: These are the big names in the list of Bitcoin treasure troves. So far, they haven’t signaled that they’re even thinking about reducing inventories.
Markets are a constant mode of redistribution. Capital flows, like it or not, from the small and weak to the big and strong. From the impatient to the patient, from the naive to the suspicious, from the cowardly to the brave, from the poor to the rich, from the stupid to the clever. Whoever has, will be given.
Also there are several countries that own large amounts of bitcoin.
There are signs that the weak hands are currently selling the most. Weak, shaky hands. Those who have invested more than they could afford, who have even taken out a loan, and those who are concerned that their gains will evaporate. Those who don’t believe in the technology and the thing, maybe because they don’t understand it, only the price in dollars.
The insiders, on the other hand, the strong hands, don’t sell. They’ve been at it so long that their stakes have multiplied so much that they don’t feel any pressure to sell. Or they are so passionate about crypto that they sell their house and shirt before they open their wallets. Or they’re so well padded that they’re able to take a beating for years.
The “sleeping” addresses hold or accumulate bitcoins. Their number keeps increasing. Chart according to BitInfoCharts.com
So those who sell are mostly weak hands. And those who are happy to take their coins are already in the starting blocks – claims Barry Silbert, boss of Grayscale and the Digital Currency Group, on Twitter:
So. much. money. patiently waiting to BTFD in bitcoin
— Barry Silbert (@BarrySilbert) January 8, 2022
“So. much. money. patiently waiting to BTFD in bitcoin” — “So. a lot. Money. Waiting patiently to buy bitcoin’s damn dip.”
You don’t have to like it. It’s a huge, screaming injustice happening here. The poor get poorer, the rich get richer. Those who bought too late are selling too early. It’s blatantly unfair.
But who will forbid people to make mistakes or act wisely? The fact is that such a development can help stabilize the price at a high level and push it further up. The stronger the hands, the stronger the market.
3.) The banks are coming
The German savings banks plan to sell and store Bitcoin and other cryptocurrencies from spring. That went through all the media. At the beginning of January , the Italian Banca Generali also announced this step.
Maybe the two banks won’t do that because the respective supervisors have “questions” about the falling prices or something. But even if not – the reports alone prove that it is possible – technically, socially and legally: the infrastructure is there, the staff is open, and the regulation is reasonably clear.
Even if the savings banks and the bank in Italy now pull in their tails: the possibility alone is large and promising.
4.) US cities are in the process of laying the groundwork for adding bitcoins to the city treasury
More and more cities in the USA are opening up to Bitcoin and other cryptocurrencies. Above Miami and El Salvador, New York and smaller cities in different states.
The mayors pose as Bitcoin fans . They plan to accept city fees in bitcoin, pay employees in bitcoin if they so wish, and most importantly, invest some of the city’s reserves in crypto.
This could be the starting signal for the public coffers to enter the league of strong hands. It is not so important whether this process will really become concrete in 2022, or whether it will be delayed because the city administrations have to dig deep holes in tough wood to get things moving. It is more important that adjustments are made and that every step along the way sends a positive market signal.
5.) El Salvador, Tesla and Microstrategy set a precedent
It hasn’t happened yet, but – who knows? Worries about staying with El Salvador, Tesla and Microstrategy are feeding concerns about the bear market.
On the other hand, the hope that other players will follow feeds the hope of a bull market. How about Facebook, Google, LinkedIn? What about Walmart, the alliance? Gazprom, Saudi or Norwegian funds?
Perhaps the moment will come when another, rather unknown, medium-sized company mobilizes several billion to become the second Microstrategy and accumulate huge amounts of Bitcoin. There are thousands or millions of companies that would be able to do this – but it takes one or two to move the market.
And who knows – maybe 2022 will see another country, like El Salvador, make bitcoins their official currency.
Bitcoin treasure troves can achieve a big effect with comparatively small means. They stabilize the course and reduce supply. Watch out for new and powerful treasuries emerging in 2022.
6.) Crypto continues to be the far superior technology
You don’t really have to explain that. Bitcoin is technically a maybe imperfect money. But it is light years ahead of current fiat money. They don’t play in the same league.
Crypto in the broader sense is not only the technically far superior method of sending values. The blockchain is also used to create tokens – i.e. to represent something from the physical world through a digital, symbolic twin – to execute contracts digitally, document processes in a provable way, connect people entrepreneurially according to certain rules and much more.
Technology isn’t just a lure to draw investors into a bubble. The technology is simply superior in what it does. And the world understands that more every year. Also with the year 2022.
7.) The scalability is solved
One of crypto’s biggest problems to date has been scalability: blockchains don’t scale. So while this would all be nice, it doesn’t work. This argument has been made over and over again.
A few years ago it might have been true. It isn’t anymore. The ecosystem HAS scaled, and those who ignore this will always underestimate the market.
As is well known, Bitcoin scales primarily via Lightning. The user experience is sometimes good, sometimes not so good, but obviously good enough to process small and micro transfers outside of the blockchain. This has led to a noticeable reduction in the burden on the blockchain. Bitcoin scales well enough to function as money.
Scaling Ethereum is more difficult and complex. Ethereum has proven to be THE platform for all kinds of smart contracts: for the execution of not just transactions, but small programs through the “Ethereum Virtual Machine (EVM)”. This has been so well received in recent years that fees have skyrocketed in ways never before imagined with Bitcoin.
The money stored in smart contracts, for example for DeFi, is distributed across more and more blockchains. Chart by The Block
In the meantime, however, a solution has also emerged for this: the “EVM ecosystem”. Ethereum is still at the center, despite the insanely high fees – sometimes several hundred euros for an operation – but around it there is now a whole fabric of other EVM-enabled blockchains, sidechains and rollups.
DeFi Llama shows which blockchains the DeFi liquidity is distributed to.
The ecosystem is currently still somewhat fragmented, but focal points and bridges are emerging. Polygon as a sidechain, Arbitrum as a rollup, and Terra, BSC, Avalanche, and Solana as alternate mainchains.
This process is extremely dynamic and deserves close monitoring.
The top EVM blockchains ranked by liquidity in DeFi by DeFi Llama.
8.) DeFi and NFT remain
The two biggest trends in the EVM ecosystem, i.e. on Ethereum and other smart contract platforms, were and are Decentralized Finance (DeFi) and Non-Fungible Tokens (NFT). Both became megatrends because they placed an already existing business on a technologically superior basis.
DeFi is safer, more profitable, more transparent, more private, more autonomous, more international and more dynamic than any kind of traditional financial service can ever be. Not the fintech startups, and certainly not the banks. Instead, they are increasingly starting to use DeFi.
The Block’s chart shows liquidity in the DeFi sector over time. Looks strong for growth.
Similar to NFTs. They are the ideal way to digitally display, trade and store artworks – or the rights to artworks. In a way, NFTs created the long-awaited market for digital artworks for the first time ever. The platforms that exploded for this purpose in 2021 are demonstrating, and the tremendous interest from art, culture and the media confirms this.
Daily NFT trading volume, here at DeFi Llama, is also showing little signs of fatigue.
Both of these markets may contract a bit in the short term. In the medium term, however, they are only at the beginning. So the hype about NFT collectibles like CryptoPunks or PudgyPenguins is waning again. But at the same time, hype about gaming tokens is spreading.
Most importantly, DeFi and NFTs bring blockchain principles to the public: wallets, keys, hardware wallets, transactions. For those who use NFT, it is only a short way to also use Ethereum and Bitcoin. He is “in”.
9.) Central banks may not be able to stop inflation
Central banks are slowly becoming aware that they have to stop inflation instead of fueling it. But will they be able to avert the price hikes?
There are increasing signs that inflation is developing a momentum of its own. Wages, salaries, fees and allowances increase with the basket prices. As natural gas goes up, so does coal, and as energy goes up, so does fertilizer… and then food? For salaries?
Perhaps a spiral of inflation has already set in motion that simply won’t go back. The economic metaphor for this is the ketchup that can’t be put back in the bottle.
Or perhaps the central banks simply lack the will or room for maneuver to act as effectively as is necessary. Turkey’s monetary policy, for example, is said to depend heavily on the metaphysical ideas of its president, and that of the European Central Bank is said to depend on the debt levels of some members.
Such developments would make money cheaper – and scarce goods such as Bitcoin and other cryptocurrencies more expensive.
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