Bitcoin price and Ether are forecast to have a rough start to 2022 but everything will be fine
The entire crypto market has had a rough start to 2022. Bitcoin price has hit a three-month low as global markets continue to sell-off in the new year due to various factors. Ethereum was even worse at the start of 2022, falling by almost 18 percent following the minutes of the Federal Reserve meeting.
Macroeconomic factors need to be rescued on Bitcoin price
Mike McGlone, Bloomberg senior commodity strategist has published a report to highlight bullish scenarios involving the two cryptocurrencies despite massive price declines. He outlined several factors that could add Bitcoin and Ether to their bullish trajectory.
The Buck, #Bitcoin & #Ethereum — Bloomberg’s #Crypto Outlook, February 2022https://t.co/F2JcGQGcGl
— Mike McGlone (@mikemcglone11) February 3, 2022
According to the executive, the top cryptocurrencies can have a relative advantage over other types of investments. “Crypto-assets may have a lot going for them as US midterm elections approach, notably versus inflation-related commodities. Typical demand and supply elasticity, and crude prices buoyed by the risk of war in Ukraine, are strong catalysts to refresh oil’s enduring bear market. It’s the opposite for Bitcoin and Ethereum”, they said.
The report notes that the elasticity of supply is negative for the top two cryptocurrencies and that prices have declined during the bull market. Furthermore, concerns about Inflation put pressure on politicians to deliver, while much of the potential US output of goods is constrained by regulations.
“We expect U.S. policymakers will embrace cryptos with proper regulation and ETFs for these reasons: dollar dominance, jobs, votes, lots of revenue (tax) and — most importantly — it’ll run counter to China’s antipathy”, McGlone opined.
The report cited ‘Crude Oil’ as the most important commodity. However, ‘the rules of supply and demand elasticity and adoption of a revolutionary technology’ could boost the price of cryptocurrencies against commodities. “Bitcoin is gaining traction as a benchmark global digital asset, while oil is being replaced by decarbonization and electrification.”
The graph highlights the collective narrative | Source: Bloomberg
The fast-rising and more volatile Bloomberg Galaxy Crypto Index (R1) has significantly outperformed the Bloomberg Commodity Index Total Return (L1). McGlone, previously, reiterated a similar story of a long-term bullish trend involving BTC and ETH. He noted that both crypto assets are still in their “newly accepted” days as they show signs of long-term health.
“Bitcoin Liveliness is a macro metric which tracks coin dormancy vs coin-day destruction. The current market is seeing a preference for HODLing, rather than spending. This leads to a downtrend in liveliness, typically seen within the context of bear market accumulation phases”, Glassnode stated.
Source: Glassnode
On-Chain indicators also support this rally for both Bitcoin and Ethereum. According to Glassnode, a data analytics platform- Bitcoin’s Liveliness shows a preference for HODLing overspending. Additionally, ETH’s metrics such as ‘Non-Zero Addresses‘ as well as ‘Number of Addresses holding 10+ coins‘ reached ATHs.
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