Crypto in 2022: Is there any hope of a comeback?

Analysts said that Crypto’s performance for the rest of the year remains largely dependent on investors’ appetite for risk, which is driven by the macroeconomic environment.

While bitcoin held out better than stocks in the first quarter, it could still drop quickly in the sell-off. “I think you can get to the bottom of the cryptocurrency much faster than you can in the traditional markets,” Joseph Hickey, global head of trading at BlockFi, said in an interview.

“It seems very likely that bitcoin will suffer losses in 2022,” said Tony Neiman, director of forex fundamentals at Informa Global Markets, noting that the cryptocurrency started the year trading near $48,000. “The most relevant question could be whether BTC/USD drops further from its recent low of $25,425,” Nieman wrote in an email to MarketWatch.

“We think this is a possibility,” Niemann wrote, citing $22,000, $20,000 and $17,840 as “realistic bearish targets” for the second half of the year.

Ben McMillan, founder and chief investment officer of IDX Digital Assets, compared the recent merger in the cryptocurrency market to the dot.com crash in the early 2000s, saying it was “ultimately good for the space.”

“It reminds me of going back to the 2000s, selling both Pets.com and Amazon.com. Both are down 80%. One went out of business, while the other became an industry leader,” MacMillan said.

“I think the key to higher prices in the long run is that we need to see a risky attempt back into the markets,” MacMillan said. This means that investors need to see inflation peaking. I think they need to see language from the Federal Reserve that helps inform expectations about when they might pull back from tightening.”

If risk appetite returns, Macmillan said he wouldn’t be surprised to see bitcoin “come back into the year, maybe even a little positive.”

Investors are also keeping an eye on Ethereum “merging,” a major upgrade that will shift the blockchain from a Proof of Work to Proof of Stake, a less power-intensive consensus mechanism.

The Ethereum Foundation, which supports the blockchain, expects the “merger” to be completed in the third or fourth quarter of this year.

“I think it would be a good price stimulus, but will it be enough to lift Ethereum if the macro environment is still tough and we still don’t see a risky asset offering? I don’t think investors should count on that,” according to MacMillan.

Despite the selling pressure in the public market, capital continues to flow into the private cryptocurrency market.

Andreessen Horowitz said Wednesday that he has raised $4.5 billion for a fourth and largest crypto fund. “We believe we are now entering the golden age of Web 3,” Chris Dixon, founder and managing partner of the company’s crypto unit, wrote in an email statement.

However, “ratings are already low for many projects.” Kavita Gupta, founder and general partner at Delta Blockchain Fund, told MarketWatch in an interview.

“I think that will make everyone take a step back, which is what actually happened. We really see ourselves as a fund looking at popular projects and saying, you know, not in that evaluation,” Gupta said. It was before, where someone else would come in and give it a high rating.”

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