After the crypto market’s recent slump, price growth in the last week suggests signs of recovery. The market rallied and grew 15% to $2 trillion, with promising growth among top coins.
The question is: Is this a short-term spike or the beginning of a sustainable trend? Experts are divided, but even with unknowns like upcoming regulations and security concerns, there’s reason to be cautiously optimistic as crypto adoption grows.
The Current State of Crypto
In the last week, Bitcoin and many of the top 80 altcoins increased in value. BTC and ETH rose 25% and 40% from their lowest January prices. Some believe that the bubble has burst, while others posit that 2022 will bring record prices. To understand the full picture, let’s analyze the major trends affecting the market.
Let’s start with understanding the current threats to crypto’s longevity.
Security Concerns are Decreasing Investor Confidence
One reason people value digital assets is their secure blockchain technology. When that technology is threatened, like in a hack, confidence decreases. On February 2nd, a major blockchain bridge called Wormhole was hit by the fourth largest crypto-hacking ever with $323 million in losses.
This theft could have broader effects as it casts doubt on the technology of smart contracts and DeFi, a rising industry. Solana is one such asset that was hurt by association; in the 24 hours after the hack, its prices fell 10%.
Regulation and Interest Rate Hikes are Coming
All signs point to increased cryptocurrency regulation soon. In the U.S., more crypto-related policies will likely emerge by 2023 as Congressional hearings are discussing crypto this week.
Furthermore, the Federal Reserve has confirmed it will raise interest rates, which will likely cause more slumps due to holders seeking less speculative options. And with Bloomberg and Goldman Sachs economists predicting as many as 5-7 2022 hikes, this could have significant impacts.
On the flip side, there are many reasons why cryptocurrency could sustain its 2021 growth.
Pop Culture is Embracing Cryptocurrency
Today, it’s likely that your favorite celebrities have their own NFT collections. Just this week, Snoop Dogg announced his NFT partnership with Gala Games. From talk show hosts to athletes to luxury brands, big-name collections have generated millions in sales with no sign of slowing down.
Institutional Support for Digital Assets is Growing
After 2021’s increased demand, millions in institutional funding have poured into crypto markets. From Wall Street to tech firms, major players like BlackRock, Credit Suisse, and Tesla have backed crypto. This institutional support can help drive the push toward mass adoption and stabilize prices.
With so much uncertainty in the still-nascent crypto market, it’s unclear how long this recovery will last. It certainly seems that 2022 will bring drawdowns due to inflation, regulation, and more. Yet there’s cause for crypto evangelists to ride out the volatility as crypto takes deeper mainstream roots and increases its utility for consumers worldwide.