Will bitcoin go back up in 2022? Analysis and Insights
Will bitcoin go back up in 2022? Let us look at some past data to make a forecast
Bitcoin’s All-time high was achieved on November 10th, 2021. It has since moved lower and is now 56% lower. What is so special about November 10th?
That was the day the US reported an inflation rate higher than 6%. See chart below
Bitcoin’s rise in the last 2 years has been driven by excess liquidity in the market.
- The Fed expanded its balance sheet by an average of $320 B in 2020 and another $100 B in 2021. That is an addition of 16% of US GDP in 2020 alone
- During the previous economic crisis, the period starting in September 2008, The Fed added $1200 B in a span of 4 months but it remained at $1200 B for 12 months or about 9% of US GDP. In fact, during this crisis (COVID 2020-21), the Fed continued expanding the balance sheet for two years 2020 and 2021.
- All of that and the drop in Crude Oil production in 2020 and 201 have increased the prices of Gas (Petrol) all over the world fuelling a Global Inflation.
This pushed the Fed to once again reduce its balance sheet and increase rates.
Will bitcoin go back up in 2022? What happened in 2017 when the Fed reduced its balance sheet?
In September 2017, The Federal Reserve began to reduce the size of its balance sheet, this went on until early 2019.
First, Bitcoin’s price rose from $3,700 to $19,600 between September and December 2017. It then crashed back to $3,180 in December 2018 and then doubled over a 12 month period to $7,300 in December 2019. Over a two year period between September 2017 and December 2019, Bitcoin rose more than twofold though there was massive volatility during that period.
Will bitcoin go back up in 2022? How is it different this time?
Let us go back to the inflation chart again. Look at the inflation numbers in 2017 versus now. It is more than double. In simple words, we can’t expect a repeat of 2017-2019. This is already known, Bitcoin has already fallen 56% since November 10th.
So if Inflation was the trigger of the crash, when are we likely to see inflation trending at a lower rate?
Will bitcoin go back up in 2022? When will inflation move lower?
We now have a definitive opinion on that issue. According to the EIA, Oil prices are likely to start falling somewhere between September and December 2022 when Oil supplies increase in the market(despite Russian Oil supplies falling). The Good news is that Food prices have already begun to move lower, two months in a row (See FAO Chart below)
A Second Opinion: WILSONS’ David Cassidy believes that there’s potential for investors to start seeing signs of (inflation) peaking over the next few months.
Will bitcoin go back up in 2022? Conclusions
- The US is likely to report lower inflation rates anywhere between August and October 2022
- Lower Inflation rates will prompt a rise in Bitcoin prices though it is unclear if the rise will be huge
- There is likely to be a high degree of volatility between now and when lower inflation rates are reported
- We have no visibility on the likely job losses and a slowdown in the economy over the next 3 months. That may extend the time period for Bitcoin’s recovery further.
A second opinion: Crypto recovery in second half of 2022 is ‘unquestionable,’ says PolySign CEO
Note: Crowdwisdom360 collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.