The year 2022 has been a very difficult one for cryptocurrencies so far. Most cryptos lost on average 75% due to the bear market. But this also makes it worthwhile for investors to invest in cryptocurrencies at low prices and deflate prices. Which factors will actually determine the price of cryptocurrencies for the remainder of 2022? In this article, we’re going to explain the top 3 factors that influence crypto prices in 2022.
How did Cryptos Perform in 2022?
The price of cryptocurrencies primarily went down in 2022. While we still saw massive price gains at the end of 2021, we can mostly only observe losses over the current year. The crypto market is firmly in the grip of the bear market. Most cryptocurrencies have lost more than 75% of their value since November 2021.
In November 2021, many cryptocurrencies reached their all-time highs. These included Bitcoin at $68,000 and Ethereum at $4,800. By the end of the year, prices had already fallen sharply and the fall continued in the months that followed. Bitcoin fell below $18,000 and Ethereum below $1,000 in June 2022.
What is Happening to Cryptos Now?
In the last few weeks, we have seen a slight stabilization in the price of cryptocurrencies. Especially in July and early August, we saw even stronger increases in the coins. Ethereum price temporarily doubled to $2,000 within a month. In the last few days, however, we saw a loss of more than 25%, dragging prices back down towards $1,500. Bitcoin on the other hand fell back to its psychological price of $20,000.
The stabilization is a sign that we are near the bottom of the bear market. Most coins have lost between 75-90 percent in value since all-time highs in November. The crypto market is currently in consolidation mode. However, there are many analysts that predict an upcoming further crash in crypto prices
How does the Price of Cryptocurrencies usually move?
Cryptocurrencies are very volatile assets. The crypto market is known for massive fluctuations. Within a few hours and days, the price of cryptocurrencies can rise or fall by double-digit percentages. Many courses are dependent on external factors and speculation.
However, we can also observe long-term trends in cryptocurrencies. The prices of the major cryptocurrencies usually rise sharply over the years. Bitcoin and Ethereum started with low values and increased in value over the years. Early investors have made massive returns on these coins.
Top 3 Factors that influence Crypto Prices in 2022
In previous years, different influencing factors on the price of cryptocurrencies have often established themselves. Some of these factors remain stable, but some of these factors also change over time. Let’s talk about the most important factors influencing the price of cryptocurrencies in 2022.
1. Macro developments in the financial markets
In 2022, the classic financial markets will have an enormous impact on the crypto market and the price of cryptocurrencies. But this was not always the case. Over the years, the crypto market has developed very autonomously from the classic financial markets. Cryptocurrencies are usually not regulated and can therefore develop a typical momentum of their own. This was especially the case in the early years of cryptocurrencies.
In 2022, the situation is slightly different. The macro developments in the financial markets play an extremely important role in the crypto market. This is how cryptocurrencies are increasing nowadays when the prices of the classic financial markets are increasing. Because in recent years, the integration with the financial markets has increased due to increased investments by institutional investors.
Above all, the prices of tech stocks are increasingly determining the price of cryptocurrencies. However, analysts assume that in the long term the crypto market should move in the opposite direction to the classic financial market. Because by their very nature, cryptos are alternatives to stocks and FIAT currencies.
2. Interest Rate Changes
The adjustment of the key interest rates by the central banks will have a very strong impact on the price of cryptocurrencies in 2022. As risk investments, cryptos have benefited enormously from the low-key interest rates in Europe and the USA in recent months and years. Many institutions in particular therefore showed a massive interest in Bitcoin and Co.
Due to the strong inflation, the central banks now have to react and adjust the key interest rates again. Due to increases, cryptocurrencies have been sold again and again in recent weeks and months. In the future, with normal interest rates, the influence could decrease, but in 2022 central banks and their interest rate adjustments often determine the price of cryptocurrencies.
3. External events
As in recent years, external events continue to be a massive factor influencing the price development of cryptocurrencies. In the early years of bitcoin and other currencies, “crypto-internal” events, such as a hack on a well-known exchange, were usually extremely decisive for gains or losses in the market. Additionally, global economic and geopolitical events are gaining more and more influence.
In 2022, the Ukraine crisis played a crucial role in the price development of cryptos. Political decisions by powerful states, especially laws regarding the legality of cryptocurrencies, also have a strong impact on prices.
Can influencing Factors change again soon?
In the future, the influencing factors should certainly change slightly again. At the moment, macro developments in financial markets are having a major impact on cryptocurrency prices. This is because we are currently in very uncertain economic times. This influencing factor could weaken or change in the future.
Especially in a future bull market, technical and conceptual factors influencing individual blockchains as well as opinions from major influencers such as Elon Musk could regain importance and trigger strong price gains or losses. This was also the case in the last bull market.
Is it good to Buy cryptos now?
Cryptocurrencies are currently cheap at the moment. Prices are risky and volatile and might move lower in Q4 2022. This is because of two main crypto events: Ethereum’s upcoming merge in September and Ripple’s lawsuit reveal in October. It is preferable to wait before making any significant purchase.
If you’re determined to buy cryptocurrencies, you can do so and add stop-loss triggers in case the market moves against you. The current dynamics are better for trading rather than investing.
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