Bitcoin kicked off 2022 nowhere where traders expected. In the step of a massive rally to the $100,000 price mark, the benchmark crypto has been moving sideways during Q4, 2021, and the first day of January.
As of press time, BTC’s price trades at $46,653 with a 1.3% loss in the daily with a seemingly increase in volatility during today’s trading session. BTC has been gravitating around the mid area of its current levels and the $50,000 zone, but quickly rejects back to the lows of this range.
In 2022 Bitcoin could continue going against traders’ expectations as the macro-economic outlook turns more complicated. Investment firm QCP Capital recently published a report with its yearly predictions for BTC and the entire crypto market.
Therein they claimed 2022 could be a year where retail investors no longer dominate the market in terms of ownership. As seen below, non-institutional investors could be replaced by public traded companies, hedge funds, and other institutions which already started to become more active in 2021.
In addition, QCP Capital expects MicroStrategy and other entities with Bitcoin holdings will seek yield on their BTC funds. Thus, the most logical choice for the publicly traded company is to start lending their BTC with the potential bearish implications for the market.
In our sister website NewsBTC, writer Eduardo Prospero did a deep dive on the implications of these decisions, especially coming from MicroStrategy. The software company holds over 100,000 BTC, and if it lends them, they could be used to short Bitcoin and negatively impact the market.
The Next Step For Bitcoin And The Crypto Market In 2022
Furthermore, QCP Capital believes 2022 that will see the creation of new Bitcoin-backed financial instruments, such as BTC-backed mortgages and bonds. El Salvador and its BTC Volcano bonds could be a prime example. The firm expects to see partnerships with “major TradFi institutions to create a BTC-collateral money market”.
As the crypto market matures, institutions will seek to have bigger participation and move into derivatives. The firm believes large players, such as banks and hedge funds, are already “eyeing” the Bitcoin/Ethereum options markets which will lead to:
Institutional participation typically compresses volatility. We see this in traditional macro assets where implied volatility consistently trades below realized volatility.
Thus, Bitcoin’s price could become more stable in 2022 ruling out the possibility of a massive new rally to the upside. In addition, the U.S. Federal Reserve will attempt to push down inflation by decreasing their asset purchases and spiking interest rates.
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These measures could start kicking in as soon as Q2, 2022, and could affect U.S. bonds and risk assets, such as Bitcoin. QCP Capital said:
Nonentheless this (a tightening FED) will lead to a further bear flattening of the 2y10y rates curves (currently at 80bp), although we don’t expect it to invert anytime in 2022. This flattening will begin to cap asset prices including BTC, especially in the 2nd half of 2022.