According to analytics firm IntoTheBlock, this can be interpreted as both bullish and bearish as the Bitcoin and altcoin market has shown volatile price movements from the first days of the year. In its January 14 “Bull and Bear case for crypto in 2022” Medium newsletter, the firm considers possible scenarios in both directions. cryptocoin.com We provide the details of the report.
What awaits crypto bulls?
According to IntoTheBlock’s recent newsletter, uncertainty in the market continues due to indecision between bulls and bears. The case of the bulls centers around the growing number of addresses holding Bitcoin (BTC), the number of transactions taking place on the leading smart contract platform Ethereum (ETH), and the ETH change made while handling the token supply. Apart from leading crypto, the status of bulls is also based on the growing popularity of NFTs, Blockchain games and DAOs. The data shows that despite the recent drop, more investors are holding on to BTC, unlike in January 2018, when massive liquidations took place after 25% of Bitcoin investors’ market cap suddenly dropped from $20,000 to $6,000.
Similarly, the analytics firm found that the number of daily transactions taking place in ETH remained strong during the most recent crypto market pullback, despite falling by a staggering 65% just two months after the 2018 crash.
Other potential catalysts include the “token-burning” mechanism introduced during the London upgrade of ETH, the NFT marketplace OpenSea, which has reached a valuation of $13 billion, wider DAO coverage, and Blockchain-based games that bring users to cryptocurrencies.
Status of altcoin bears
The case of the bears revolves around the actions of the Federal Reserve, the possibility of a new variant of Covid-19, and the theory of the four-year cycle. The Fed recently announced that it will seek to curb inflation through balance sheet normalization or quantitative tightening (QT). According to IntoTheBlock, this could potentially reduce the USD supply correlated with the BTC price:
The high correlation between the two means a negative outlook for Bitcoin if the Fed continues with QT and raises rates aggressively.
Other bear flags include the possibility of BTC hitting ATH levels every four years (2013, 2017, 2021) followed by a crashing trend the following year and a stronger case of Covid that will result in economy-destroying lockdowns:
Overall, the macro environment points to risks that should be considered by investors. These market forces are likely to play out in the coming months as the market gains more clarity from the Fed and activity from NFTs, games and DAOs seeks to take crypto to new heights.
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