BTC: forecast for 2022, considering the fundamental situation

The digital asset market is experiencing another growth cycle. The decline in the price of blue-crypto-chips since the end of last year, as well as the decrease in the capitalization of the entire crypto market, was caused primarily by plans to tighten monetary policy by global central banks, especially the FED and the ECB. That liquidity, which poured into the markets since April 2020, which was a kind of response of central banks to the COVID-19 pandemic, has not passed without a trace for the markets: the unfolding inflationary spiral in fiat currencies carries serious risks for the classic financial assets. Against this background, alternative investment instruments, which include digital assets (Bitcoin, Ethereum, etc.), are becoming more popular among investors, also because of the high yield with controlled risks.

Among the factors that may support the market of digital assets in the coming months, I include the following:

1. Slow monetary policy tightening. Despite its stance and verbal interventions, the Fed is in no hurry to hike rates dramatically, and economic indicators point to an increase in FED balance sheets, meaning QE continues, albeit not at such a significant pace. Risks of reduced liquidity spooked investors in digital assets in December, while now a delay by the FED could give Bitcoin support.
   
   
2. Loosening of monetary policy in China. Unlike other countries, China's financial authorities explicitly say they will support the domestic market and businesses (in particular, local developers), and China can be expected to loosen rather than tighten monetary policy in this regard. However, despite the ban on crypto mining in China, digital assets continue to be popular among retail investors, and many blockchain companies operate in the region despite regulatory pressure. China is a major player in the digital asset market, and fresh liquidity from the Bank of China could support cryptocurrency market.
   
   
3. Inflation. Rising prices of commodity assets, which is a consequence of pumping fresh liquidity into the markets, is already causing serious consequences for economies. In addition, geopolitical risks related to Ukraine may become a trigger for a fall in prices on the stock exchanges in Europe. In this regard, low-inflationary assets such as BTC and ETH will be in demand (internal inflation in these assets is now about 1.7% and 0.5%, which makes them more reliable investment than fiat). The rise in cryptocurrency prices will occur along with the rise in prices in commodity markets.
   
   
4. Development of the blockchain industry. There is no "internal negative" in the digital asset market right now: the most capitalized projects are moving on their roadmaps, certain sectors such as DeFi and Web3 are actively developing, and all this could lead to a recapitalization of the market from the current $2 trillion mark to $4 trillion as early as this year.

The technical picture on BTC is also positive for the bulls. After a long price growth within the third impulse Elliott wave, a corrective wave (4) is currently forming on Bitcoin. It is still difficult to say what form this wave will take, but the overall picture suggests high chances for the Bitcoin to continue developing momentum with the goal to update the historical maximum within the framework of the 5th wave.

At the same time, it is not excluded that the current correction minimum at $29,000 will be updated within the flat. This decline will not change the prospects of long-term growth, so buying Bitcoin now, it is worth being prepared for a possible drawdown and price growth closer to Q3-Q4 of this year in a bullish trend.

About the Author

Viktor Pershikov, MFTA is the Chief strategist at 8848 Invest, a specialist in the cryptocurrencies field and technical analysis, with 12 years of experience on financial markets and holder of the IFTA-diploma
Master of Financial Technical Analysis (MFTA).

About the author

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