5 Bitcoin Investment Themes to Watch
The stars appear to be aligning for bitcoin in 2022. Inflation continues to rear its head in the economy, eroding the purchasing power of consumers, institutional investors have begun to dip their toe into the crypto waters, and mainstream investors are finally coming around to the idea of a digital currency. Plus blockchain gaming has taking the industry by storm, and bitcoin is making its presence in this niche known.
While the leading cryptocurrency failed to live up to to the most ambitious price targets from 2021, it is still up 46% for the year and has several potential catalysts that could potentially fuel the bitcoin price in 2022.
1.) Inflation
Inflation is currently hovering at 6.8%, sending consumer prices rising at their fastest rate in nearly 40 years. While shoppers continue to face sticker shock, Americans are looking to place their hard-earned savings somewhere it won’t evaporate. That’s the problem bitcoin is designed to solve, thanks to the prescience of bitcoin creator Satoshi Nakamoto, who warned about the rise of inflation back in 2009.
Unlike fiat money, bitcoin is not subject to the whims of any central bank, whose money printer has been turned on, plus it has a finite supply of 21 million coins that will ever be mined. Now that inflation has gripped the global economy, despite characterizations of it being “transitory” in nature, investors look to store-of-value assets to preserve and growth their wealth, and they are increasingly turning to bitcoin over gold.
While the leading cryptocurrency is off its peak level, bitcoin still advanced in 2021 and boasts a market cap of $983 billion. Meanwhile, rival store-of-value asset gold actually lost ground in 2021, falling 3.6% despite sky-high inflation. Bitcoin’s gains add insult to injury for gold investors, considering gold is designed to be an inflation hedge and failed to do its job of late.
2.) Bullish Price Predictions
If 2021 taught the cryptocurrency community anything it’s that nobody knows exactly what bitcoin, or any crypto for that matter, is going to do. Market experts were calling for bitcoin to hit $100,000 in 2021, and bitcoin ultimately finished the year below $50,000 after peaking at close to $69,000 in November. Last year’s surprises notwithstanding, market prognosticators are placing their bullish bets for 2022.
Among them, Fundstrat managing partner Tom Lee told a Market Rebellion roundtable that 2022 should be a good year for bitcoin. He points to the headwinds that bitcoin faced in 2021, such as China’s government banning bitcoin mining, the process by which the network is secured and new coins are minted. With that negative event in the rearview mirror, Lee expects bitcoin not only to attain the $100,000 level in 2022 but also potentially achieve $200,000 per coin, even if it sounds “fantastical.”
3.) Institutional Adoption
Institutional investors started coming off the sidelines in earnest in 2021, starting a chain reaction that is likely to spill over into 2022. Billionaire hedge fund trader Paul Tudor Jones has thrown his weight behind bitcoin over gold as a hedge against inflation and believes the flagship crypto is “a great way to protect wealth over the long run.”
Another theme that is unfolding on is companies adding bitcoin to their treasuries instead of keeping their assets in cash. Michael Saylor, CEO of business enterprise company MicroStrategy, kicked off this trend over a year ago and has been buying more bitcoin ever since. His company just purchased 1,914 more bitcoins before the new year,
In addition to Saylor, other CEOs who have caught bitcoin fever for their balance sheets include Jack Dorsey of payments company Block (formerly known as Square) and Tesla’s Elon Musk.
One of the products that institutional investors have been waiting for is a bitcoin ETF, and they got their wish in 2021. Regulators finally approved a bitcoin ETF, the ProShares Bitcoin Strategy ETF (BITO). The chief complaint from the bitcoin community, however, is that this fund is based on bitcoin futures contracts, not the spot market where investors could gain direct exposure to the digital asset.
U.S. SEC Commissioner Hester Peirce, who is affectionately known as “Crypto Mom,” recently expressed her disbelief to CoinDesk that the market is still waiting for a bitcoin spot market ETF. The SEC has bitcoin spot-market ETF applications on its desk, and with friends like Peirce in crypto’s corner, there is always the possibility that one could see the light of day in 2022.
4.) Mainstream Adoption
Bitcoin got closer to mainstream adoption than ever before when El Salvador revealed that it would make the biggest cryptocurrency legal tender in the Central American nation. El Salvador President Nayib Bukele has also unveiled plans to build a Bitcoin City, the funds for which he plans to raise with bitcoin bonds.
President Bukele has been nurturing tech innovation and will position the city near volcanoes from which the country can harness geothermal energy for electricity and bitcoin mining. Since El Salvador announced its plans, other countries like Cuba have made similar moves, which could create a virtuous cycle in the region.
Another trend that has emerged is corporate America on the hunt for crypto and blockchain talent. Companies like Amazon are continuing that hiring trend into 2022, with the e-commerce giant currently looking to fill a blockchain global practice lead job, among other related positions. Wall Street has decided if you can’t beat them, join them and has also been hiring for crypto-related jobs. Banks are fattening the pay by as much as 50% to attract blockchain talent.
Pro sports teams including the NBA’s Dallas Mavericks accept bitcoin as a payment method, while Tesla used to but stopped after Elon Musk took issue with the leading crypto’s energy consumption. Musk said he is willing to reconsider adding support for bitcoin once again if the industry can lessen its carbon footprint.
5.) Gaming
Blockchain games are looked to as a catalyst to bring in more users to the cryptocurrency industry, which stands to benefit bitcoin as the biggest digital asset with the longest track record. Most of the time, blockchain gaming projects have their own native cryptocurrencies. But GameFi, which is a hybrid category of decentralized finance (DeFi) and gaming, is increasingly involving bitcoin too. And these mobile games are also making their way to the App Store, where they gain exposure to mainstream gamers. The downloads pale in comparison to Ethereum-based games like Axie Infinity, but it’s definitely something to watch in the new year.
This post was produced and syndicated by Wealth of Geeks.
