Real Estate Investment
Crypto’s Crystal Ball
2021 was a year in which many more people became involved in the world of cryptocurrencies. Crypto ownership leaped by 178% to reach 295 million people, while speculative meme coins like Dogecoin and Shiba Inu had a very encouraging year in general. However, even before the new variant of Covid-19 appeared in November, “The economy was poised to slow”, in the words of Bloomberg. One reason may have been that economic demand was getting stronger, whereas industry was not ready to meet it with sufficient supply. Inflation came as a result and consumers found themselves facing 7% price increases. As the year drew to a close, it became clearer that the US Federal Reserve could be expected to soon raise interest rates and reduce economic stimulus, which reduced traders’ risk appetites—a decrease that continues as tensions between Russia and USA over Ukraine heat up.
In late January 2022, Bloomberg reported that “The long-reigning expectation that risky assets will mostly go up seems to have been broken”. Bitcoin was suddenly worth about a half of what it was worth ten weeks before, and Ethereum had also tumbled. Cathie Wood’s ARK Innovation crypto ETF, which saw fabulous gains of 153% in 2020, was down 55% from February 2021. Traders were not interested in risky assets, and so, understandably, meme coins like Dogecoin and Shiba Inu suffered as a result. Dogecoin lost 24% of its value in one week and 12% of its value in a single day. Shiba lost 18% of its value in a week. Other small cryptos like Solana, Luna, Cardano and Polkadot also plummeted, some finding themselves drained by 15% in a day. The cheapest digital currency has a future in 2022, but the question is what kind of future. The most powerful digital currencies 2022 has to offer may have more to feel confident about, but even this remains to be seen. For those considering iFOREX crypto currencies investment as CFDs, let’s delve more closely into the state of the crypto world as the ball gets rolling in 2022.
One point worth making is that not all cryptos are made equal. “The dog coins were good examples of the speculative excesses in the space”, suggested commodity analyst Mike McGlone, but “Bitcoin, Ether and the proliferation of crypto dollars – will resume transmogrifying the global financial system”. Indeed, even at the end of January 2022 the voices of crypto enthusiasts could still be heard. The fact remained, though, that Bitcoin, the crypto with the largest market value in the world, was down 45% at the end of January compared with the previous November.
Shares in Coinbase Global Inc. (COIN), America’s biggest platform for trading cryptos, took a dive of 15.7% in late January, at the same time that Bitcoin dropped 8.7%. “The correlation between COIN and Bitcoin remains very strong”, explained Matt Maley of Miller Tabak & Co. Stocks of crypto mining companies also suffered. Riot Blockchain Inc. shares lost 6.6%, and stocks in Marathon Digital Holdings Inc. lost 6%. An interesting exception to the meme coin drop in the first half of January was the crypto Baby Doge, which appreciated by 99% in the first ten days of the new year, driven up by social media enthusiasm.
The Drawing-Power of Decimals
If you’re wondering which cheapest digital currency has a future in 2022, consider that one prospect of cheaper cryptos is their denomination in decimal places. In late November 2021, one Shiba Inu would cost you $0.00004893 and one SafeMoon was worth even less at $0.00000348. Earlier that year a Dogecoin was worth less than a cent. This may have something to do with the charm of meme
coins in some traders’ eyes. “Retail investors are plowing money into them because they look cheap. There’s a psychological element here”, said Halsey Minor of Public Mint last November. Or, to put it differently, “Nobody wants to buy 0.01 Bitcoin, but everybody wants to have a million of Shiba”, in the words of Jonathan Azeroual of INX. Some traders tend to hope that, with the passing time, each Shiba might come to be worth a dollar. This may be one reason why the belief that “The cheapest digital currency has a future in 2022” still persisted during the crypto slides of January this year.
The most powerful digital currencies 2022 has to show may be the biggest and most established ones, but, with US regulatory scrutiny beginning to hone in on cryptos, only the passing of time will tell. The extent of impending interest rate hikes in March, and those which may come later on in the year, will bear an influence on traders’ feelings about digital currency. Those involved with IFOREX crypto currencies investment in 2022 will have to keep an eye on Fed policy, but also on global economic growth and the political tensions in Eastern Europe.