Bitcoin has seen an unexpected price drop this month. The question is, are there any catalysts that could support the move to $100,000 by 2022?

There are a lot of mixed opinions about the bitcoin price right now. Some believe Bitcoin will reach $1 million in the next 10 years, while others believe it will eventually return to $0.

Without focusing too much on predictions for the next 5 years, let’s focus on what Bitcoin can do, say, in the next six months.

Since the market has not yet broken out of its downtrend, the price predictions have changed dramatically. For example, Antoni Trenchev, founder of Nexo Finance, sees Bitcoin price reaching $100,000 by mid-2022.

On the contrary, Carol Alexander, a professor at the University of Sussex, believes that the Bitcoin price could fall as low as $10,000, erasing all the gains it has made in 2021.

Bitcoin is currently between the two predictions of Trenchev and Alexander and is currently trading at $36,025.

Bitcoin price chart | Source: Trade View

The circulating supply of Bitcoin will increase by an average of 6.25 BTC every 10 minutes until the next halving in early 2024, meaning miners will generate around 900 BTC per day. As a result, by the end of June 2022, a total of 162,900 BTC will have been created over the year.

This will bring the total circulating supply of Bitcoin to around 19,078 million BTC. If the BTC price were $100,000 at this point, the total market cap would be nearly $2 trillion, up 128.5% from the early-year valuation of nearly $875 billion.

Conversely, a drop to $10,000 would push Bitcoin’s market cap below $190 billion, down $685 billion, or about 78%.

Amidst these incredible predictions, it is debatable whether or not Bitcoin can move towards any of the above goals. In our opinion, the answer is YES, mostly because bitcoin price has historically been notoriously volatile.

Bitcoin Quarterly Profits | Source: coin jar

Another question to consider is whether investors are ready to pump nearly $1 trillion into the bitcoin market over the next six months? Trenchev believes that this is possible due to the “cheap money” factor.

Government devaluation remains a catalyst

Investors will notice that the US dollar’s valuation has been recovering lately.

A popular economic index, the “US Dollar Index” measures the strength of the US Dollar against a basket of six weighted currencies – Euro (EUR), Japanese Yen (JPY), Pound Sterling (GBP), Canadian Dollar (CAD) , Swedish Krona (SEK) and Swiss Franc (CHF) – up more than 7% to 96.22 over the past year.

US Dollar Index Weekly Frame | Source: TradingView

It is also important to note that the dollar’s valuation has only risen against fiat currencies, but has steadily fallen for commodities.

one report A recent report from the US Bureau of Labor Statistics showed that the price consumers paid for everyday items in December 2021 was 7% higher than a year earlier. In other words, inflation in the world’s largest economy rose to levels not seen before 1982.

This shows that the US dollar is no different than a weak boxer in a ring competing with six equally weak boxers. Sure, the greenback won the round against everyone, but he also ran away from real opponents.

Speaking of competition, let’s compare its value to a scarcer commodity, gold.

Fiat currency against gold since 1900 | Source: VOIMA

The chart above also shows that almost all fiat currencies have been eclipsed against gold. One thorny issue people don’t like to talk about is inflation, which benefits investors who hoard precious metals — or hard currency equivalents — against the current downtrend in currencies like the US dollar.

There is currently approximately $40 trillion in circulation across all markets, including all physical funds and funds deposited in checking and savings accounts. Meanwhile, investments, derivatives, and crypto markets are all above $1.3 billion.

So, enough US dollars are available in the market to inflate the bitcoin market by $1 trillion, taking the price of each bitcoin to $100,000 over the next six months.

Why Hasn’t Bitcoin Hit $100,000 Yet?

Before responding to this argument, it would be wiser to look at Bitcoin’s market cap performance over the years.

Bitcoin’s six-month market cap | Source: TradingView

In the six-month timeframe chart above, one can see that there hasn’t been a single instance of bitcoin’s market cap increasing by more than $1 trillion. Likewise, there is no case where the market value of bitcoin falls by more than $190 billion in six months, as is required when the price of bitcoin falls to $10,000.

While the bitcoin market has neither recovered nor crashed, according to historical data it is attracting more capital than it is consuming, showing why the price per bitcoin has increased by more than 14,250% since January 2014.

Now, back to the “why it didn’t happen” argument, there seems to be only one answer: uncertainty. And the uncertainty comes from many quarters, from regulatory issues to concerns that the bitcoin market may need a correction after rallying for almost two straight years.

The Fed’s ‘anger’ is hurting investor confidence

The most talked about reason for Bitcoin’s recent drop from $69,000 to $34,000 was the Federal Reserve’s (Fed) decision to end its monthly $120 billion asset purchase program earlier than expected. This is expected to be followed by at least three rate hikes from the current near-zero levels.

This loose monetary policy has pumped around $6.5 trillion since the global market crash in March 2020 caused by Covid-19. The value of the dollar fell on excess liquidity, while riskier assets, including bitcoin, turned bullish.

According to Crossborder Capital founder Michael Howell, the excess money in the market “has to go somewhere.”

Weekly M2 money supply chart | Source: TradingView

When the Fed eases its quantitative easing policy to curb inflation, the Fed effectively removes excess dollars from the market. And when the market — hypothetically — runs out of money, they salvage it by selling their most profitable investments, be they stocks, real estate, Rolex watches, or cryptocurrencies.

As a result, the next six months could become a back-and-forth between those who need cash and those who don’t. Inflation caused by a depreciating dollar can prompt many investors to sell their assets, including bitcoin. But with the Fed cutting liquidity, the crypto market could struggle to attract new money.

This makes Bitcoin vulnerable to investors and companies that have excess cash in their coffers and want to turn it into easily liquid assets.

So far, Bitcoin has attracted big names like Tesla, Square, MicroStrategy, and others. Of course, at least one well-known Wall Street company would be willing to add Bitcoin to its coffers to push the price down to $100,000.

Waiting for the retail investor boom

As inflation creeps into people’s daily lives, their ability to use hard assets to protect their savings could also benefit the Bitcoin market. For example, last year’s surge to $69,000 coincided with an unprecedented rise in retail interest rates, as reported by Grayscale Investment.

The US company surveyed 1,000 investors and found that 59% are interested in investing in Bitcoin. Meanwhile, 55% said they bought between December 2020 and December 2021.

Bitcoin address with a balance other than 0 | Source: Glassnode

Boom or crash, here’s what needs to happen

If Bitcoin hits $100,000 by the end of June 2022, that’s what needs to happen.

• The money supply M2 remains at an all-time high.
• Rate hike plans fail to keep inflation below the Fed’s 2% target.
• The number of other bitcoin wallets has not continued to rise to new record highs.
• Many companies are adding Bitcoin to their tills.

Meanwhile, Bitcoin could drop to $10,000 if:

• Long-term investors decide to sell bitcoin to raise cash.
• Regulatory issues and sharp corrections in stock prices are impacting cryptocurrency valuations.

Any unforeseen market manipulation or black swan event will lower the price of Bitcoin, like the March 2020 flash crash.

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Mr teacher

According to Cointelegraph