6 Signs of More Pain for Bitcoin Investors

Bitcoin has been rising since 2021 and tripled in value since November 2021. And the optimism is justified. The digital currency has increased by 70% since the start of the year, bringing the total worth of the crypto market to $2 trillion.

Bitcoin's prospects have been dampened by recent price volatility and heightened regulatory scrutiny.

Experts warn that the market may head for a downturn. With the year already shaping up to be another wild ride for digital currencies, let's look at a few predictions that analysts have made.

The hype surrounding decentralized applications and decentralized finance (DeFi), the rise of non-fungible tokens (NFTs), and the massive potential for blockchain-based gaming in the metaverse have all fueled cryptocurrency investor interest.

However, the coming year may not be kind to digital currencies. The following are six reasons why cryptocurrencies could crash in 2022.

1. History Suggests Reversions Are Commonplace

Since March 2020, the total value of digital currencies has surged more than fourteen-fold to 2.14 trillion dollars. It is similar to the 35-fold gain in overall market value between March 2017 and January 2018, which occurred over the last ten months. 

Following the high in January 2018, however, the overall value of all cryptocurrencies dropped by nearly 90% over the next 11 months. Similar reversions have occurred in other cryptos.

2. Blockchain Euphoria Outdoes Its Use Case

People can be thrilled about blockchain technology‘s future potential. DeFi allows for almost immediate cross-border payments at low costs, and it can democratize the process so that even residents of emerging markets can participate. Blockchains with smart contracts have the potential to alter supply chains.

3. Inability To Detach Itself From The Stock Market

Another reason cryptocurrencies may crash in 2022 is the inability to separate from the stock market. Digital currencies are considered independent assets and a hedge against the broader market. 

For example, Bitcoin (BTC 0.17%) gives the impression of a limited token supply, with a maximum of 21 million. With the US money supply growing, investors regard Bitcoin as a safe haven investment that will help them store and increase their wealth — at least better than the ever-diluting dollar.

Swipe up now to read the full post!