Bitcoin’s hash rate is near all-time highs, but the price continues to drop. 8 experts revealed what investors should know about Bitcoin trading in 2022 and 14 alternative altcoin projects to consider. we too cryptocoin.com We have prepared the shares of the experts for our readers.
Hash rate went up, but Bitcoin crashed!
Bitcoin’s hashrate metric hit an all-time high on January 2, according to data from analytics tool Glassnode. This is a milestone for the network and marks the recovery following China’s ban on crypto mining in early 2021. Many miners were forced to go offline due to the ban, and estimates suggested that Chinese miners accounted for around 75% of the world’s mining power. Noelle Acheson, head of market insights at Genesis Trading, comments:
The full recovery of the more than 50% drop in the Bitcoin hashrate following the ban on activity in China in May underscores the resilience and resilience of the network.
Bitcoin has been on the decline for weeks, although the hash rate is close to all-time highs. It’s down about 40% from its November ATH of around $69,000, according to CoinMarketCap. And this week, the price is down 9% from $47,343 earlier in the week to below $42,000 by Friday. This came in the wake of the deterioration in equities as investors shunned risky assets after FOMC minutes took a hawkish stance against monetary policy.
What does the Hash rate mean for Bitcoin?
Eight crypto experts evaluate how investors should use the hashrate metric, what the recent price action for Bitcoin in 2022 means, and whether there are crypto alternatives to consider for the new year.
Bitcoin’s hash rate is an important security metric. The higher the computing power (hash rate) of the miners, the higher the security and flexibility of the overall network. After China’s ban, there were concerns that the network would become less secure as the hash rate dropped below 50% at the current rate of about 178 exahash per second.
But Acheson says the network is showing itself safe in the face of the decline. “Today, it would cost an attacker or asset more than $1.5 billion to reverse the state of Bitcoin transactions for just one hour,” comments Eliézer Ndinga, research leader at digital asset firm 21Shares.
It also indicates long-term investment. “Continued investment in mining power shows strong optimism from a community that is widely regarded as the industry’s ‘insider’,” Acheson says. Stephen Ehrlich, CEO and co-founder of crypto broker Voyager Digital, states that mining requires significant upfront investment.
Acheson states that the Bitcoin mining expansion in previous years was financed by the sale of Bitcoin. Stephen Ehrlich says this tends to be a driver of selling pressure. But as the industry matures and gains access to other forms of financing, this is easing that pressure. Acheson comments:
Given the recent funding and capacity expansion announcements from several Bitcoin miners, we can expect the hash rate to continue to rise over the next few months.
But in the middle of this week, civil unrest in Kazakhstan has created difficulties for Bitcoin miners in the region to operate at full capacity. This has put some pressure on the hash rate and may continue to do so in the coming weeks.
Should Bitcoin and altcoin investors care?
Matteo Perruccio, international partner and president of Wave Financial, says investors can use hash power to gauge the strength of the network. However, Charlie Morris, CIO and founder of ByteTree Asset Management, places less weight on this metric because it is a lagging indicator that reflects decisions made by miners months ago.
John Warren, CEO of GEM Mining, warns investors not to put too much weight on a single metric, saying, “People should understand that there is a direct correlation between the hash rate and the BTC price. As the hash rate rises, many legacy miners will stop mining unless the BTC price continues to rise.”
Are there alternative metrics for bitcoin and altcoin projects?
Investors can also look at other metrics. 21Shares’ Ndinga looks to the derivatives market to gauge sentiment and volatility. Ndinga says investors can understand the amount of leverage in the market by looking at the futures open interest rate.
Marcus Sotiriou, an analyst at digital asset broker GlobalBlock, notes that open interest is particularly interesting right now. He adds that despite the $812 million liquidation resulting from the last drop, there is still a significant amount of open interest. Marcus Sotiriou explains:
If open interest were aggressively long rather than short, we would see a larger string of liquidations, meaning an upside move could happen soon.
To understand volatility, Ndinga suggests looking at DVOL, the VIX of the options-based Bitcoin market traded on the largest crypto options exchange Deribit.
Bitcoin price view
Considering fundamentals, metrics and techniques, many experts have a calm outlook for Bitcoin in the short term. “Short-term prudence prevails as the network softens and there is a move towards risk aversion in financial markets more generally,” says ByteTree’s Morris.
Perrucio of Wave Financial remains bullish as long as Bitcoin doesn’t drop below $28,727. The founder of AllStarCharts.com, JC Parets, focuses entirely on technical analysis and has an unbiased view of Bitcoin since it fell below $53,000. JC Parets shares these views:
Right now BTC is in range and continues to absorb all the overall supply from April and May of last year. This is a process and it still continues. I believe Bitcoin will eventually rise above $100,000. We will buy the breakout when that happens.
Altcoin projects followed by experts
With the short-term outlook subdued, investors may want to look into altcoin projects in 2022. Experts share their opinions. Long on Terra’s LUNA and Harmony’s ONE, JC Parets says:
Terra is the strongest name that shows the most relative strength. If it’s above $80, we’ll continue to have it with a target of $130. Relative power is also high in Avalanche and Harmony.
With the market consolidating in 2022, Morris expects real-use tokens to do well. He finds Polygon (MATIC) interesting as it enables cheaper transactions, and Arweave (AR) as it provides ‘permanent’ data storage for a one-time fee.
Based on developer activity, 21Shares’ Ndinga highlights Terra (LUNA) and Solana (SOL) as the fastest growing ecosystems. Voyager’s Ehrlich also expects these altcoin projects to enter a race with Avalanche (AVAX), Polkadot (DOT) and Ethereum (ETH) in 2022. Perruccio of Wave Financial points to the following altcoins:
There are a number of crypto assets with strong potential for the next year: ADA, LINK, AVAX, LUNA, MATIC and ALGO.
Similar to Morris, GlobalBlock’s Sotiriou expects assets with real use cases to succeed. He expects Decentraland (MANA) and Sandbox (SAND), two blue chip metaverse entities, to catch up with this trend. He also states that ZK-rollups, the technology that provides cheaper and faster transactions, may also outperform Bitcoin, with Loopring (LRC) being a standout altcoin.
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