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In 2022, bitcoin and other cryptocurrencies may become slightly less volatile
itcoin prices have been on a wild ride this year, and they are on track to end the year significantly higher than they started.
One bitcoin is currently trading at just under $49,000, a staggering 66 percent increase over January levels. However, the top cryptocurrency is down nearly 30% from its November record high of nearly $69,000.
What does the future hold for bitcoin and other cryptocurrencies?
There is no doubt that cryptocurrency has entered the mainstream. The combined market capitalisation of all cryptocurrencies in circulation exceeds $2.2 trillion, with bitcoin accounting for approximately $920 billion of that total.
Ethereum, or ether, is also closing the gap. Ethereum, a popular cryptocurrency for smart contracts and non-fungible tokens (NFTs), has a market cap of $475 billion.
Prices of ether have more than quadrupled this year, rising from around $730 to nearly $4,000.
Individual investors can now choose from a variety of bitcoin exchange-traded funds (ETFs). ETFs investing in other popular cryptocurrencies may also be on the horizon.
"The next possible step is the launch of additional ETFs for other coins. In early 2022, there is a good chance that an ether ETF will be launched "Natixis Investment Managers' senior vice president and head of institutional product and ETFs, Nick Elward, stated. "An ether ETF is likely to be launched in early 2022."
Significant institutional and professional investors, including top fund managers George Soros and Stanley Druckenmiller, have invested in cryptocurrency. Nonetheless, the recent correction serves as a stark reminder of how notoriously volatile bitcoin and other cryptocurrency prices can be.
Are we in for milder crypto winters in the future?
Numerous investors rushed into bitcoin in 2017 and witnessed prices soar from around $1,000 per coin to just under $20,000 by December.
Then the crash occurred, with bitcoin plummeting to around $3,500 by the end of 2018. Although those prices have clearly recovered — and then some — it took until December 2020 for the coin to reclaim the $20,000 mark.
Such wild swings in cryptocurrency prices are almost certainly here to stay. The key, according to experts, is for investors to develop the ability to stomach them and weather the inevitable ups and downs.
"We have observed market corrections on multiple occasions," Anton Chashchin, managing partner of Bitfrost, a provider of digital asset services, told CNN Business in an email. "If institutional investors begin to profit, a ripple effect can occur."
He added, however, that these large firms are likely to continue flocking to bitcoin as a hedge against inflation and rising interest rates, which could harm traditional government-backed currencies.
"Even if institutional investor interest is motivated by Fear of Missing Out (FOMO), all institutional decisions have been made with care. These businesses have recognised the potential benefits of cryptocurrency "According to Chashchin.
Increased adoption and legitimacy of cryptocurrencies will almost certainly also help to alleviate some of the volatility. While prices may continue to move sharply, they may not be as violently as in recent years.
"Having larger institutions with deeper pockets and more stable hands purchase cryptos will help," said John Wu, president of Ava Labs, an ethereum-compatible blockchain company. "They are resilient to volatility."
Beyond bitcoin
Elward of Natixis Investment believes that more fund managers will examine cryptocurrencies closely and may move beyond passively managed bitcoin ETFs that merely mirror the direction of bitcoin futures.
"Active investing is a natural fit for cryptocurrency investors. I anticipate that there will be additional managers analysing which companies to acquire "Elward explained.
He added that cryptocurrency is a natural extension of the so-called alternative investment world, a category of assets that includes gold and other precious metals but is not limited to them.
Along those lines, some analysts believe that ether and binance coin, the world's third most valuable cryptocurrency, may continue to gain market share against bitcoin.
"You must consider the utility of cryptos. Ether may eventually surpass bitcoin in market capitalisation. It serves as the framework for NFT transactions "Alex Lemberg, CEO of the Nimbus Platform, a decentralised lending platform, stated.
Additionally, Wu of Ava Labs believes that investors will look beyond bitcoin.
"We anticipate increased dispersion in the cryptocurrency world. Prices will fluctuate more in response to adoption "'He stated. "Cryptos will trade less in tandem."
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By Crypto Piratesitcoin prices have been on a wild ride this year, and they are on track to end the year significantly higher than they started.
One bitcoin is currently trading at just under $49,000, a staggering 66 percent increase over January levels. However, the top cryptocurrency is down nearly 30% from its November record high of nearly $69,000.
What does the future hold for bitcoin and other cryptocurrencies?
There is no doubt that cryptocurrency has entered the mainstream. The combined market capitalisation of all cryptocurrencies in circulation exceeds $2.2 trillion, with bitcoin accounting for approximately $920 billion of that total.
Ethereum, or ether, is also closing the gap. Ethereum, a popular cryptocurrency for smart contracts and non-fungible tokens (NFTs), has a market cap of $475 billion.
Prices of ether have more than quadrupled this year, rising from around $730 to nearly $4,000.
Individual investors can now choose from a variety of bitcoin exchange-traded funds (ETFs). ETFs investing in other popular cryptocurrencies may also be on the horizon.
"The next possible step is the launch of additional ETFs for other coins. In early 2022, there is a good chance that an ether ETF will be launched "Natixis Investment Managers' senior vice president and head of institutional product and ETFs, Nick Elward, stated. "An ether ETF is likely to be launched in early 2022."
Significant institutional and professional investors, including top fund managers George Soros and Stanley Druckenmiller, have invested in cryptocurrency. Nonetheless, the recent correction serves as a stark reminder of how notoriously volatile bitcoin and other cryptocurrency prices can be.
Are we in for milder crypto winters in the future?
Numerous investors rushed into bitcoin in 2017 and witnessed prices soar from around $1,000 per coin to just under $20,000 by December.
Then the crash occurred, with bitcoin plummeting to around $3,500 by the end of 2018. Although those prices have clearly recovered — and then some — it took until December 2020 for the coin to reclaim the $20,000 mark.
Such wild swings in cryptocurrency prices are almost certainly here to stay. The key, according to experts, is for investors to develop the ability to stomach them and weather the inevitable ups and downs.
"We have observed market corrections on multiple occasions," Anton Chashchin, managing partner of Bitfrost, a provider of digital asset services, told CNN Business in an email. "If institutional investors begin to profit, a ripple effect can occur."
He added, however, that these large firms are likely to continue flocking to bitcoin as a hedge against inflation and rising interest rates, which could harm traditional government-backed currencies.
"Even if institutional investor interest is motivated by Fear of Missing Out (FOMO), all institutional decisions have been made with care. These businesses have recognised the potential benefits of cryptocurrency "According to Chashchin.
Increased adoption and legitimacy of cryptocurrencies will almost certainly also help to alleviate some of the volatility. While prices may continue to move sharply, they may not be as violently as in recent years.
"Having larger institutions with deeper pockets and more stable hands purchase cryptos will help," said John Wu, president of Ava Labs, an ethereum-compatible blockchain company. "They are resilient to volatility."
Beyond bitcoin
Elward of Natixis Investment believes that more fund managers will examine cryptocurrencies closely and may move beyond passively managed bitcoin ETFs that merely mirror the direction of bitcoin futures.
"Active investing is a natural fit for cryptocurrency investors. I anticipate that there will be additional managers analysing which companies to acquire "Elward explained.
He added that cryptocurrency is a natural extension of the so-called alternative investment world, a category of assets that includes gold and other precious metals but is not limited to them.
Along those lines, some analysts believe that ether and binance coin, the world's third most valuable cryptocurrency, may continue to gain market share against bitcoin.
"You must consider the utility of cryptos. Ether may eventually surpass bitcoin in market capitalisation. It serves as the framework for NFT transactions "Alex Lemberg, CEO of the Nimbus Platform, a decentralised lending platform, stated.
Additionally, Wu of Ava Labs believes that investors will look beyond bitcoin.
"We anticipate increased dispersion in the cryptocurrency world. Prices will fluctuate more in response to adoption "'He stated. "Cryptos will trade less in tandem."
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