You may be wondering how these global economic shifts will affect the crypto industry. The most significant changes have to do with who is investing in cryptocurrency now and what they are looking for. Before the institutionalization of crypto, it was mostly a game for people who were into tech but who lacked financial savvy.
Now that companies like Tesla have bought up $1.5 billion worth of bitcoin, you’re going to see some changes in the cryptocurrency market as institutional investors start to play a bigger role—and not just at hedge funds and other institutions that traditionally invest in speculative assets.
These institutional players seem to be more interested in keeping up with technological trends than speculating on price fluctuations or quick gains from trading, which means they’re likely to hold their positions over long periods of time rather than buy low and sell high as quickly as possible. As this happens (and as more institutions get involved), we’ll see less volatility and possibly an increase in asset price valuations.
To reiterate: over the next few years, we’ll definitely see more participation in the crypto sector by large financial firms and hedge funds; this will hopefully lead us toward a more stable market without drastic highs and lows based on speculation alone (though there will always be room for healthy speculation).
Here are five trends affecting crypto prices in 2022.
If you’re a crypto aficionado, you probably have a very sophisticated understanding of the market. You know that when the price is down, it’s actually a great time to buy (since prices will likely rebound), and selling at an all-time high is incredibly foolish. Most people get this wrong, however.
As your mom becomes more interested in crypto (and she will), her choices will influence the value of your assets—even if she has no idea what she’s doing. That’s because many people consider cryptocurrency more as magic beans than valuable coins, so they buy and sell based on emotions and predictions rather than facts or analysis.
Bitcoin Hash Rate
We’ve covered a lot of information in this article, so it’s important to recap. In investing, as in life, it is crucial to keep the big picture in mind. When you invest in Bitcoin or any other cryptocurrency, you are ultimately betting on the success of that network and its community. As we discussed with the hash rate, these two factors are inseparable from one another.
The Bitcoin network is constantly evolving and improving. Entities that invest in making Bitcoin more secure (such as miners) do so because they believe there will be a payoff for them down the road if/when the network gains more adoption and acceptance from merchants and consumers around the world. This positive feedback loop between mining investment and price appreciation creates a powerful incentive structure for people to contribute to the security of the network no matter what happens.
Developer activity is a strong indicator of the health of a project. After all, if the developers are not actively maintaining and pushing updates to the code, it stands to reason that their project may be stalling out.
While most cryptocurrencies have a public repository on GitHub, some have private repositories. The history of developer activity can also be found at sites like CoinCodeCap and CryptoMiso, where they track and analyze developer commits.
When looking at developer activity for some of the major cryptocurrencies, you’ll notice that Bitcoin has more than double any other coin’s commits over the last year (49,000+). Ethereum comes in second with 19,000+ commits in 2019 alone.*
You should know that the price-earnings ratio is not exactly meshed with the idea of bitcoin as an investment vehicle, despite the fact that some people have treated it as such. It’s a measure of value, but it’s not a measure of growth. Rather than being a good way to predict future prices, it’s more of a tool for comparing cryptocurrencies in their current state.
For example, if you had a collection of coins and wanted to weigh their potential benefits against one another, then using the PE ratio could be extremely helpful in deciding which ones you should hold onto and which you should sell off. It’s also worth noting that the PE model isn’t just specific to bitcoin; it can be used on any cryptocurrency!
Mainstream Media Coverage
You might remember the time that Elon Musk, founder and CEO of Tesla, appeared on Saturday Night Live (SNL) in May 2021. During his opening monologue, he got serious about the value of cryptocurrencies like Bitcoin (BTC). This came as a shock to many people because just a week earlier, he had announced that Tesla would no longer be accepting Bitcoin as payment. The market reacted by crashing!
So while positive coverage often results in higher prices, negative press can have the opposite effect. In fact, we’ve seen so many price spikes when mainstream media outlets mention Bitcoin that it’s clear there’s a direct correlation between public perception and crypto prices. But how does this affect your investment?
The crypto market is a constantly-changing beast. The trends we’ve seen in the past few years—the meteoric rise of Bitcoin, the market correction, and now the gradual recovery of cryptocurrencies—are just a few examples of how volatile and unpredictable this market can be. But we’re still here: analysts, traders, investors, and enthusiasts alike are all still here. We see this as an opportunity to take stock of what’s happened so far and plan for what might come next.