By Isabelle Lee
It was a banner year for digital assets in 2021, and the new year should see cryptocurrencies reach new milestones.
Crypto investors went on yet another roller-coaster ride in 2021. Nearly every cryptocurrency from bitcoin to dogecoin hit record highs and delivered eye-popping gains. But in May, about 50% of the entire market’s value was wiped out in just seven days. And September saw China’s clampdown against crypto escalate to a ban on all transactions.
Other wild crypto moments from 2021 came when El Salvador made bitcoin legal tender, meme tokens exploded, and an NFT sold for $69 million.
So what’s in store for 2022? Arcane Research, a blockchain research firm, made dozens of crypto predictions for 2022. Here are five:
Bitcoin will outperform or underperform the S&P 500
Despite the threat to the global economic recovery from rising coronavirus cases, both bitcoin and the benchmark index locked in impressive gains in 2021: Bitcoin jumped 66%, and the S&P 500 rose around 27%.
But given that bitcoin has behaved more and more like a risk-on asset, Arcane Research said it will further amplify significant movements of the stock market.
“Therefore, if the stock market continues to increase in 2022, bitcoin will likely outperform,” the firm said. “But if we see a red year for the stock market, bitcoin will likely underperform.”
Ether will outperform bitcoin again
Long viewed as second fiddle, ether far outperformed bitcoin in 2021, gaining 418% compared to 66% for bitcoin.
“This performance gap is the widest seen since 2015 when ethereum was launched,” Arcane said.
Among the reasons ether will continue to outperform in 2022 is the surge in NFT sales volumes. Most of these tokens still run on the ethereum blockchain. And major upgrades this year from the Berlin update to the London hard fork helped improve the network’s capacity to process more transactions.