Some experts think that the price of the digital currency will decline in the coming months.
In November, it hit a record high of almost $69,000. It is currently sitting below $50,000, down from its peak. Wall Street defines bear markets as a decline of 20% or more from recent highs, but it's worth noting that bitcoin is notorious for its volatility.
Carol Alexander, professor of finance at Sussex University, said she expects the price of the digital currency to plunge to $10,000 in 2022, wiping out all of its gains in the past year and a half.
Alexander said that he would think about leaving the virtual currency soon because it will probably crash next year. Her bearish call hinges on the idea that bitcoin is more of a toy than an investment.
After a big run-up in the price, Alexander warns that it could nosedive. After climbing to a high of nearly $20,000 a few months earlier, the price of the digital currency plummeted. More institutional investors are jumping into the market, which the backers of thecryptocurrencies say is different this time.
Todd Lowenstein, chief equity strategist of Union Bank's private banking arm, said that the price chart of the digital currency appears to track many historical asset bubbles and busts.
It's a common investment case for the use of the virtual currency to hedge against rising inflation caused by the government. There is a chance that the Federal Reserve may take the wind out of the sails of the digital currency.
He said that the end oflocks conditions will harm overvalued asset classes and speculative areas of the market.
Some people are not sure if the party will end in 2022. Yuya Hasegawa, a market analyst at Bitbank, said that the biggest risk factor was the Fed's decision to reduce staff.
The approval of the first spotbitcoin exchange-traded fund in the United States is a big development for the industry.
The Securities and Exchange Commission approved the launch of the ProShares Bitcoin StrategyETF this year, but the product tracks futures contracts rather than giving investors direct exposure to thecryptocurrencies.
Financial derivatives such as futures oblige an investor to buy or sell an asset at a later date and for an agreed-upon price. Many of the people who are invested in thecryptocurrencies are novice traders and they may be too risky for the ProSharesETF to track futures prices.
The high costs of rolling over contracts is one of the reasons why the Bitcoin futures exchange traded fund is not very retail-friendly.
The market is large and mature enough to support an exchange traded fund for the Bitcoin Spot.
Grayscale Investments has filed to convert its trust into an exchange traded fund. There are many other applications waiting in the wings.
The share of the market for digital currency like ethereum has grown as the industry has evolved. Analysts expect this to continue into next year, as investors look to smaller pockets of the digital currency in the hope of big gains.
Alexander flagged ethereum, solana, polkadot and cardano as coins to watch.
She said that retail investors will switch to other coins belonging to theBlockchains which serve an essential and fundamental role in decentralization finance as they realize the dangers of trading on unregulated venues.
Alexander predicted that the market cap of the digital currency would be half of the combined cap of smart contract coins.
Bryan Gross, network steward at ICHI, said that the highest growth areas of the coin are likely to be the developments of decentralization. DeFi and DAOs are new types of internet community.
Money deposited into DeFi services has surpassed $200 billion for the first time this year, and experts expect demand to grow further in the future.
Web3 is expected to gain more traction next year. Web3 covers Defi and other technologies. It has found skeptics in the likes of Jack Dorsey.
China banned all activities related to cryptocurrencies and the U.S. authorities cracked down on certain aspects of the market. Regulation is expected to be a key issue for the sector.
Ayyar said that it will be a big year on the regulatory front. The U.S. is interested in bringing regulation to the space.
The SEC has said that the legal gray zone of cryptocurrencies is not securities, and Ayyar expects to see some clarification on that.
The company is locked horns with the U.S. watchdog over the coin. The SEC alleges that the company and two of its executives sold more than a billion dollars worth of the token illegally. The company says that it shouldn't be considered a security.
Regulators are likely to focus on stable coins next year. The price of the U.S. dollar is tied to the value of these token. There are concerns about whether the peg to the dollar is justified by the amount of assets in the reserve.
Regulators will look under the hood on the soundness of the underlying collateral and amount of leverage used in stable coins.
When the housing and mortgage crises became suspect and risk appetites repriced aggressively, people remember.
Regulators have begun scrutinizing the space. The Bank for International Settlements called for the regulation of DeFi, saying it was worried about services marketing themselves as "decentralized" when that may not be the case.
