By the end of the first week of 2022 Bitcoin has lost more than 10% in value and the price is currently trading around the $41,000 level.
With the first week of 2022 ending Bitcoin losing more than 10% in value, starting the year above $47,000 and currently trading above $41,000, the benchmark cryptocurrency appears to be reacting to macroeconomic factors and could see further declines in the short term.
The performance of the market-leading digital currency relied on a combination of factors this week, as the continued rise in expectations of the Federal Reserve's tightening of its monetary policy had a significant impact on Bitcoin sentiment.
The FOMC meeting minutes released this week confirmed that the Fed is now in a tight spot, with the March rate hike pricing at around 70%.
With a higher level of institutional participants now dealing with bitcoin, the market is taking on the characteristics of a traditional risk asset, and with this in mind, bitcoin is likely to remain geared towards lower prices while the Fed's expectations of monetary policy tightening continue to rise.
Bitcoin outage in Kazakhstan
One of the major bearish developments for the benchmark currency this week was the massive disruption to the network due to the situation in Kazakhstan, against the backdrop of widespread protests and riots over the weekend and into this week, and the government shutdown of the internet.
Since the country hosts about 20 % operations global bitcoin mining Beginning in the third quarter of 2021, outages have raised questions about vulnerabilities within the Bitcoin network, leading to a sharp drop in investor sentiment. This comes on the back of last year's regulatory reform in China, which also dealt a blow to currency mining.
Some observers fear that the price of bitcoin will collapse this year after the huge rise it recorded in 2021, a strategist expects the bitcoin to decline to reach less than $ 10,000 during 2022, and thus the currency will lose almost all the gains it gained over the past year and a half, and said That 2018 may be repeated again in 2022, especially after the broad gains he made in 2021, just like in 2017.
Others are of the opinion that Bitcoin can weather any storms this year, and they predict that the coin may experience dips in the near term but could range from 20% to 30% like we saw in 2021, then another period of recovery.
Institutionalization is a major topic
The “institutionalization” of digital currencies is expected to be a major topic during 2022, as investing in bitcoin and other digital assets gains more credibility from traditional banks and financial institutions.
We are likely to see more institutional involvement from traditional finance companies, in 2021 we have seen big names like Visa buy NFTs and get into digital assets, payment services will also continue to shift towards digital asset adoption as on the retail side, digital assets are decreasing Obstacle from access to lending, bets, payments and traditional banking services.
While many institutions and traditional finance companies remain skeptical, they can no longer ignore crypto as a legitimate asset class, many of them are neither bullish nor bearish for cryptocurrencies, but simply want to embrace it so as not to be left behind and for inherent hedges.