Should investors worry about the current market situation in the crypto world?

Considering all things, the year 2021 was a pretty good year for investors in the crypto sphere.

Bitcoin, the king of all cryptocurrencies, saw a boost of 70% since the beginning of 2021. This drove the entire crypto market into a bullish season with a combined market cap of  $2 trillion. You can also use NFT Loophole.

The year 2021 also saw the first major crypto firm, Coinbase go public in April. This improved the participation of Wall Street banks such as Goldman Sachs. That’s not all, the approval of the first U.S. exchange-traded fund was also linked to bitcoin thanks to Coinbase going public. 

However, as the year went by, heightened regulatory protocols by several regulatory bodies in various countries were established. China, for instance, took a strong stance against crypto banning all crypto trading and mining activities. This sure did affect the market negatively. Eventually, intense price fluctuations doused bitcoin’s prospect, the price of bitcoin fell and other altcoins followed suit.

Crypto crash

Even though the crypto market has taken a sharp decline, experts strongly believe the crypto party is not ending anytime soon. 

The end of 2021, November to be precise, saw bitcoin rise to an all-time high of about $69,000. At that time, many thought bitcoin was headed to $100,000 but the price took a sharp fall now sitting below $50,000. From its all-time high, bitcoin is presently down by 30% but all this isn’t a cause for alarm as bitcoin is recognized for its volatility. 

However, many experts are still wary of the crypto market, some experts believe history could repeat itself like in 2018. On the other hand, other experts believe that won’t happen given more institutional investors are now present in the market. But according to Todd Lowenstein, bitcoin’s price chart looks to follow a lot of previous bubbles and burst assets. He claims bitcoin is only holding on to the ‘this time it’s different’ narrative like every other bubble. It’s evident he’s not an advocate of the crypto world and thinks everything will come to an end sooner or later. 

Lowenstein continued saying bitcoin’s primary investment case is its function as a hedge against the continuous increase in inflation. Therefore, there’s the looking risk of a more hawkish Federal Reserve taking the wind out of bitcoin’s sails. Lowenstein also affirmed that with the liquidity tide subsiding and Goldilocks conditions endings, the speculative areas and overhauled asset classes will 

disproportionately come to harm.  He claimed these events will equally affect the crypto sphere pushing down the price of bitcoin. 

However, as much as Lowenstein’s predictions are negative, many investors like Yuya Hasegawa believe bitcoin is here to stay in 2022 and beyond. Hasegawa asserted that the biggest risk factor to be worried about, namely [quantitative tapering] has been decided on. Therefore it’s all green light for cryptocurrency. 

A big year on the regulatory front

No doubt regulators were strict on crypto regulations last year with China banning all crypto trading and mining. On the other hand, U.S. authorities also made some specific regulations on some spectra of the market. Although, it is not as strict as China. 

Based on last year’s regulatory trend, many analysts believe regulation is going to be a major issue in 2022. Luno’s Ayyar mentioned that 2021 saw a heightened interest from various governments who look to regulate the crypto market. Among these governments, the United States showed the most interest in wanting to regulate and legislate the crypto market for its citizens. However, Ayyar hopes more clarification will come in this new year concerning the legal gray zone of various altcoins that SEC has claimed are not securities. 

A lot of experts believe more regulations will be coming this new year with stablecoins being a major area. Lowenstein believes stable coins will face more scrutiny as regulators start to evaluate the authenticity of their collateral as well as leverage deployed. 

Asides from stablecoins, evaluation, and scrutiny in the DeFi space have also begun last year and will continue this year. The Bank for International Settlements shared its sentiments saying while the DeFi space claims to offer decentralized services that may not be true. 

With so many regulations coming in, experts worry that it may cause a lot of price fluctuations in the market. And ultimately, this may cause a dip in the price of all crypto assets. 

Conclusion 

With so many dramas and situations happening in the crypto world, one thing is certain: Bitcoin is here to stay! Sure regulations will come in, and prices of crypto assets will fall but it’s all green in the future. 

Although patience is required there’s nothing to worry about in the current happenings in the crypto sphere.