Bitcoin in 2022

The global cryptocurrency market and the blockchain ecosystem have had an exciting year: capitalization has surpassed all previous records, approaching $3 trillion (£2.2 trillion), dramatic price surges, El Salvador becoming the first country to adopt Bitcoin as legal tender, Coinbase IPO, and ProShares Bitcoin ETFs.

Gala (up over 40,000 percent), Axie Infinity (AXS), XYO (XYO), Terra (LUNA), Ecomi (OMI), Solana (SOL), and Polygon (all up over 9,000 percent) were the top achievers (MATIC, up over 11,500 percent ). On the other hand, there were some significant losses, including Internet Computer (ICP), which scored -96 percent.

So, what can we look forward to in the year 2022? A few forecasts are as follows:

 

Bitcoin remains the “King”

Despite the fact that Bitcoin’s market share fell by roughly 20% in 2021, and investors began to look at alternatives like Ethereum, Solana, and Polkadot, BTC remains the most “heavy” crypto asset. The ratio of BTC’s market capitalization to the overall crypto market capitalization is used to determine Bitcoin dominance. Between January 2011 and January 2022, altcoin dominance climbed from roughly 30% to 60%. Layer-1 networks like as Solana, Avalanche, and Terra, among others, began to be considered potential Ethereum alternatives.

At the same time, long-term Bitcoin holdings increased by about 16 percent between 2016 and 2021, while short-term holding supply fell by about 32 percent. As a result, “Sovereign Supply” (total supply not traded on exchanges) reached an all-time high of about 13 million BTC. This “macro consolidation” has boosted Bitcoin’s confidence.

The demand for BTC and its derivatives is likely to rise in 2022 as a result of a number of causes, including the one described above. According to statistics, overall open interest in BTC futures nearly doubled in 2021, increasing by roughly 97 percent. Overall, we can see decreasing trading volumes and growing open interest, which could signal a localised leverage squeeze in the first half of 2022. This could imply that when the BTC price fluctuates too quickly, leveraged traders’ trading positions are liquidated as prices move against them.

This year, Bitcoin banking is projected to develop as well. Bitcoin is a unique asset in that it has neither a counterparty risk nor a credit risk, making it ideal for use as a collateral. Bitcoin has so far dominated the options market as a collateral. The bitcoin loan business is expected to expand as well. BTC now has a lower rate of collateralisation, indicating underleveraging and indicating that it could be used as a DeFi collateral. Bitcoin holders will be able to borrow, lend, provision liquidity, and so on with more of their bitcoins. More companies will enter this industry, such as Genesis, which has seen a 245 percent YoY increase in outstanding loans.

Other blockchains will cover a larger portion of bitcoin’s supply. Wrapped bitcoin is a cryptocurrency that has been tokenized. Wrapped bitcoin (wBTC or WBTC), Huobi BTC (hBTC), renBTC, Synthetix’s sBTC, Tokenlon’s imBTC, pNetwork’s pBTC, and others are among the several wrapped bitcoins now available. Multiple wrapped versions of bitcoin are used to back ACoconut’s acBTC, PieDAO’s BTC++, and mStable’s mBTC. Wrapped bitcoins have the advantage of being compatible with various blockchain networks, wallets, decentralised apps (dApps), and smart contracts, such as Ethereum. Because Ethereum powers a large portion of the DeFi, bitcoin users will feel less “isolated.” As a result, smart contract platforms and decentralised finance (DeFi) apps benefit from it in terms of utility and liquidity.

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