In 2022, there could be persistent inflation, tighter central bank monetary policy or a reverse to lower inflation that leads to lower rates. These are all possible scenarios and could have an impact on crypto markets, according to CryptoCompare in a new report.
The report provided details about CryptoCompare’s outlook for 2022 and its view on the past year. It also stated that the most likely macroeconomic scenario was that inflation would persist into 2022. This means that crypto assets will likely outperform other asset types. The report stated that this could occur “as Bitcoin takes its anti-inflationary position as a store of value.”
The report’s authors also warned that the sector could face a bearisher scenario. The report stated that this scenario could see continued inflation, which could cause central banks to raise interest rate, which could result in outflows from crypto to “more defensive investment types.”
CryptoCompare stated that the least likely scenario is that crypto decouples with traditional financial markets because of a factor specific to this space. This could be due to things like innovation and a growing community that have the potential for impacting cryptoasset prices regardless the macroeconomic background.
In their outlook report for 2022 they also touched on the hot topic of where we are at the moment in the crypto market cycle. Many market participants argue that the bull market may not be over as no “blowoff top” has yet been seen.
It was noted that although the camp that believes the 4-year cycles (which roughly correspond with Bitcoin’s halving period) is correct, the classic “blow off top” has not yet been seen. It also mentioned other people who believe that the cycle theory is incorrect and that past cycles are just coincidences. According to the report, it could be that crypto is currently in bear market following the fall in December and November.
The report also predicted that decentralized finance ( DeFi) will be institutionalized in the New Year, in the same way traditional cryptoassets saw increased adoption by institutions in 2020, 2021. This was illustrated by veteran investors such as Paul Tudor Jones who entered bitcoin.
We expect this trend will accelerate over the next years. This is a topic that has many optimists, including Cathie Wood (CEO of Ark Invest), who stated in October that ‘the move of institutions into Bitcoin…could increase USD 500,000 to Bitcoin’s price if [they] moved into the tune 5% [of the portfolio] over the course of time’,” the report stated.
CryptoCompare also pointed out that retail adoption of crypto is a key driver for the asset class’s growth in emerging markets.
It stated that it expected emerging markets in Latin America and Asia to adopt crypto faster than in 2022. This was due to “dire economic challenges” as well as high inflation in many of the developing countries.
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