Recent Volatility Prepares Bitcoin For Bullish New Year
VYSYN Ventures Weekly Insights #77 — Investors affirm confidence in market-leading cryptocurrency
Bitcoin has displayed characteristic volatility over the past month. After reaching a new all-time high (ATH) of $69,000, the world’s largest cryptocurrency embarked on a pullback. At one point, Bitcoin dropped to as low as $41,967, representing a 39% pullback from the current ATH before bouncing back up again. Despite this pullback, investors remain optimistic, with many predicting that in the coming year, Bitcoin prices will climb to new highs.
In the latest VYSYN Release, we examine Bitcoin’s price behavior and identify some of the key moments that led to the recent volatility. We analyze the overall behavior of the cryptocurrency and how prices have developed in 2021, noting the observations and predictions of some key participants along the way.
Bitcoin volatility soars as new year approaches
Bitcoin’s current ATH was achieved on November 10th, 2021, when it reached the $69,000 level. The surge that brought about this new ATH introduced more positive sentiment, and the momentum behind the surge encouraged expectations for more upside discoveries in price.
However, Bitcoin retraced immediately after reaching the new ATH, and prices pulled back in installments. A few catalysts behind the drops were the intensified regulatory enforcement in China against Bitcoin and cryptocurrencies, and more recently, the soured sentiment in tech stocks, leading to a pullback as investors fled to the safety of Treasuries.
A sharp pullback in tech stocks such as Tesla and the ARK Innovation Fund occurred on Friday, December 3rd, 2021, coinciding with a corresponding pullback in Bitcoin. Within 48 hours of this development, Bitcoin lost over $15,000 and fell to its lowest level since the end of September 2021. However, the price rebounded immediately, heading towards the $50,000 level which it has struggled to break above at the time of writing.
Bitcoin exhibits behavioral change
Bitcoin’s behavior in the past month reflects its volatility in 2021. Throughout the year, the price of Bitcoin has evolved in cycles involving major swings in both directions. Despite price movements in both ways, Bitcoin is still up a significant 41% from the beginning of the year, at the time of writing.
Large swings like this are not new to the Bitcoin market. However, their nature has changed. While previous swings were scattered and unpredictable, the current bullish and bearish swings seem to be following a definite pattern. In some ways, despite the volatility, the market has become more explainable in retrospect. This is one of the impacts of having institutional participants whose actions affect large volumes, rather than the scattered displays of retail investors who dominated the market prior to this.
Even on a national level, the South American country of El Salvador became the first country in the world to recognize Bitcoin as a legal tender. Other institutional-level participation in the Bitcoin market includes the approval of some Bitcoin Futures Exchange Trust Funds (ETFs) by the Security and Exchange Commission (SEC) of the United States. This development in particular opened the markets for traditional and large investors to try their hands in the novel marketplace.
Institutional investors trade in large volumes that have recognizable impacts on the market. For example, the pullback between December 3rd and 4th, 2021, also reflected a significant drop in open interests in Bitcoin Futures across exchanges. This new found characteristic appears to be a motivating factor for optimistic fans of the cryptocurrency. Several users remain positive that Bitcoin price is preparing for another major surge.
Bitcoin price predictions for 2022
Kjetil Hove Pettersen, CEO of Norwegian Bitcoin miner Kryptovault, is one of those who believe Bitcoin prices will more than double the current ATH in 2022. Pettersen expects the current market volatility to remain, with sharp movements across both sides of the divide. However, he predicts that just like it happened in 2021, overall, Bitcoin will go higher, and could reach $140,000.
Another user that sees Bitcoin climbing even higher than Pettersen’s predicted target is Bernardo Schucman, Senior Vice President of Bitcoin miner CleanSpark’s Digital Currency Division. Schucman’s prediction is based on the increasing hashrate of Bitcoin as a result of an influx of new miners, especially in the United States.
Schucman noted that apart from being responsible for increased hashrate on the Bitcoin network, miners also play a major role in the adoption of the cryptocurrency since they are also “strong holders of the asset”. He expects the price of Bitcoin to reach $250,000 by the end of 2022.
Expecting higher prices for Bitcoin seems logical, considering how the cryptocurrency has developed over the years and the key changes that were integrated to the network in 2021. Most of these factors point towards the increased adoption of Bitcoin in the mainstream. It is also interesting to note how the bullish sentiment generated by Bitcoin cuts across the entire cryptocurrency market. As Bitcoin moves, the entire market usually follows.
About VYSYN Ventures
VYSYN Ventures is a longstanding venture capital company that specializes in funding and supporting disruptive startups in the blockchain and cryptocurrency industry. We have provided early-stage support to several projects that have grown to USD market capitalizations of hundreds of millions and even billions. Our incubation program focuses on providing capital allocations, versatile marketing support, and tech assistance.