How High Could Crypto Go in 2022?

Despite high turbulence, zoom out and cryptocurrency appears to be growing exponentially. How much higher can the market go? 

The crypto market reached dizzying heights in the last year. In 2021, coins such as Bitcoin and Ethereum hit record highs and we saw the explosion of NFTs as cryptographic assets continue to grow in popularity. While the market has recently seen a significant correction, the recent all-time highs prompted some analysts, investors and spectators to ask, how high can crypto go?

This question was explored by Messari in its highly-anticipated Crypto Theses for 2022 report. The report outlines some of the key trends to look out for this upcoming year and dissects potential growth opportunities for crypto in the short and long term. We’ve broken down the predictions and what they mean for the future of crypto.

The Messari report analyzes the biggest trends to keep an eye on this year but importantly, also looks at where we currently are in the crypto market cycle, and how much more growth could be in store. Here are a few of the key takeaways:

How high can Bitcoin go?

It’s become quite clear in recent years that Bitcoin stands alone in the cryptocurrency market. It has a unique value proposition due to its scarcity, it’s unique history, and, much like gold, it’s priced as an asset rather than valued. However, a Bitcoin metric that’s worth keeping an eye on is MVRV (market-value-to-realized-value). It compares an asset’s market capitalization to its realized capitalization so can be helpful in identifying when an asset’s price dips below or exceeds its fair value.

Historically, Bitcoin hitting an MVRV of 3 has indicated a top is approaching and signaled a good time for investors to withdraw profits. If we were to see an MVRV of 3 or above this year, that could take Bitcoin’s price to around $100,000-125,000. 

In terms of its long-term goals, Bitcoin’s next big achievement would be to reach the market cap of gold which is $11.4 trillion, while Bitcoin’s is currently $691 billion. Achieving this feat would take the price of one Bitcoin to approximately $500,000 and would help to solidify it as a store of wealth in the minds of skeptics.

How high can Ethereum go?

There have been discussions for several years about whether Ethereum’s market cap could overtake Bitcoin’s. On 10 November 2021, we saw Ethereum hit its all-time high of $4,850, but it’s still a long way away from Bitcoin’s all-time high above $68,000, set on the same day.

Ethereum’s infrastructural challenges and the move towards multi-chain solutions have made a flippening seem unlikely anytime soon but it’s still a key token to watch. If Ethereum can successfully iron out its problems, there could be huge growth for Ethereum still to come.

Ethereum rivals may be risky bets

While Ethereum is still about a year away from actualising its major Ethereum 2.0 upgrade (now rebranded the “Consensus Layer”), a flurry of competitor protocols has emerged, gaining significant traction and threatening Ethereum’s supremacy.

Cryptocurrencies such as Solana and Avalanche have been tapped as “Ethereum killers” for their newer technologies. Their future value and dominance heavily rely on how they’re developed but it’s evident that these alternatives will likely play a part in a multi-chain future. That said, these new coins come with significant risks. For example. Solana’s network was down for 48 hours this week, it’s the second failure in recent months, the outages saw the price of the coin plummet.

How far can DeFi grow?

The DeFi market saw incredible growth in 2020 and 2021. According to the Messari report, its current value is “less than 1% of the global banks’ market cap”, which indicates a lot of room for future growth.

That said, there are still issues that need to be worked out within DeFi, including impending financial regulation and excessive gas fees on the Ethereum network. There are undoubtedly worthwhile investment opportunities through DeFi but it’s not without its risks.

Are NFTs here to stay?

Whether you pay attention to crypto or not, it’s more than likely that you heard about NFTs in 2021.

The NFT sector exploded last year and it’s estimated that its market cap hit $22 billion. This has prompted future market cap predictions of more than 10x its current value. However, it’s worth noting that while these predictions might represent the value of the market as a whole, this may not speak to the value of individual projects as investment assets. Crypto has always been a high-risk, high-reward space, in no area is that more true than for NFTs. It appears clear that in one way or another NFTs are here to stay, but whether most of the NFTs currently being traded will retain their value is very hard to say.

What does the future hold for crypto?

No one can truly predict how high crypto will go in a particular timeframe and anyone who claims to do so with certainty should be treated with suspicion. That said, a wide variety of indicators suggest that it’s clear that there is a lot of growth potential still to come. 

The impressive expansion that we saw in 2021 demonstrated how much momentum is pouring into the market and is a good indication of the direction that crypto could go in the long term.

However, as with any investment, there are no guarantees that it will continue to trend upwards. It’s important to invest according to your risk tolerance with due consideration of the unpredictability of the market. 

As always, this article does not constitute financial advice and you should be sure to do your own research and consult a professional financial advisor before making any investment decision.

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