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Bitcoin, the original cryptocurrency, is made possible by blockchain technology, a method of generating and tracking digital assets and processing transactions. When bitcoin is doing well, other cryptocurrencies are likely to be doing well. When bitcoin is doing poorly, other cryptos are likely also suffering.

Nobody, however, seems to agree on the price of bitcoin in the future.

Why 2021 Was a Good Year for Bitcoin

Over 2021, bitcoin enjoyed a steep rise in its market value. At the start of the year, a single coin was valued at $32,000, and by April that number had doubled. Traders were optimistic that wider acceptance of bitcoin by merchants and big banks would support the price.

However, the promise outran the reality — there was still no way to use bitcoin for much of anything except speculative, risky trading. A decline in the stock market in late 2021, and a fall in highly valued growth stocks, carried cryptocurrencies down as well. Bitcoin finished 2021 at about $47,300. As of June 24, 2022, bitcoin is selling for $21,145.

The Risk-Off Trade

Bitcoin’s price has continued to fall through the first half of 2022, as has the stock market. Investors have turned to assets that perform well in a time of a slowing economy, higher inflation and rising interest rates.

As cryptocurrency is still widely seen as a risky, speculative asset, this “risk-off” trade brought bitcoin down to below $20,000 in mid June. This represents a loss of over two thirds of the value bitcoin reached at its November 2021 peak of $69,000, with no signs of sustained recovery in sight.

Concerns over the high electricity use associated with bitcoin mining and the banning of cryptocurrency transactions by China also weighed on bitcoin’s value.  

Good To Know

Robert Breedlove, CEO of Parallax Digital, might be the most optimistic of all analysts on bitcoin. In 2021, Breedlove predicted a price of $12.5 million by 2031, seeing high inflation as the main driver of this run-up. With fiat currency losing its value, the thinking goes, some investors may turn to what they perceive as a safer haven in digital money. However, it should be noted that Breedlove previously predicted that bitcoin would surpass $300,000 by October 2021 — a month that saw a high price of $65,993.

Expanding Investment and Payment Use 

Nevertheless, as more companies adopt bitcoin as a method of payment, its value could stabilize. Major companies that already accept bitcoin include Microsoft, AT&T, Starbucks, PayPal and Amazon, although you must jump through a hoop or two to pay that way.

In addition, as more platforms make room for bitcoin trading, the market should expand among individual traders and investors. While Coinbase, Kraken and online investment firms like Robinhood and Webull all allow the purchase of cryptocurrency, big, traditional brokerages are just climbing onboard.

Goldman Sachs, for example, announced in April that it would give high-net-worth clients access to bitcoin and ethereum. Other brokerages, such as Schwab, Fidelity and TD Ameritrade, simply allow their clients exposure to the crypto market, although Fidelity will allow companies to allow their employees to invest up to 20% of their 401(k)s in bitcoin, NBC News reported.

For the most part, however, these companies offer trading in coin trusts and exchange-traded funds that hold crypto assets. 

What Is the Future of Bitcoin? Whales Dive In

The future price of bitcoin depends on whether digital currencies can serve as useful financial assets. There was little support for this concept among financial newsmakers in the early years, but some once-skeptical major investors have come around.

Buffet and Others Now Believers

Warren Buffett, whose Berkshire Hathaway company has rewarded investors with tremendous returns over decades, once described cryptocurrency as “rat poison squared,” and he swore he would never touch it. But by purchasing NuBank, a digital “neobank” involved in the crypto space, Buffet has given bitcoin a secondhand vote of confidence.

Lloyd Blankfein, former chairman of Goldman Sachs, has announced that he’s “evolving” on bitcoin and other cryptocurrencies. Jack Dorsey, founder of Twitter, resigned his job as CEO of that company to run Block, a payment processing leader that is now developing new digital currency applications. 

Adoption by these and other corporate leaders could support a reversal in bitcoin’s free fall and bring higher value by the end of 2022. 

What Will Bitcoin Be Worth in 2022 and 2023? Educated Guesses

User-generated cryptocurrency price predictions on CoinMarketCap forecast that bitcoin will reached $39,003 by June 30. For this to be the case, it would need to nearly double its current value.

Looking further ahead, two expert panels recently weighed in with bitcoin price predictions leading into next year. A 35-member group reported by Forbes expects bitcoin to start the new year at about $76,000.

The second panel is less bullish. That one, according to Forkast, scaled back an earlier target to $65,185 as 2022 draws to a close. The cryptocurrency exchange Changelly expects bitcoin prices to range between $53,039 and $64,734 in 2023, with an average target of $54,570.

Ian Balina, founder of crypto research firm Token Metrics, sees bitcoin in a down cycle due to general investor pessimism on risk assets, but he also sees a benefit from the development of Web 3.0, a new blockchain-based internet. That said, bitcoin is an old-school cryptocurrency, which could give Web 3.0 coins like chainlink and polkadot an edge over the longer term.

More practical uses of bitcoin and cryptocurrencies are coming online. When trading isn’t the only thing you can do with them — except for some digital shopping options — the value of these new assets could increase.

Takeaway

While many experts predict a positive future for bitcoin, it’s important to invest with caution. As the recent market has demonstrated, cryptocurrency is a volatile investment.

Daria Uhlig contributed to the reporting for this article.

Information is accurate as of June 24, 2022.

This article originally appeared on GOBankingRates.com: Bitcoin Price Prediction 2022

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In March, Federal Reserve Chairman Jerome Powell said it’s “easy to see the risks” of cryptocurrencies, and warned that central banks “don’t know how some digital products will behave in times of market stress.”

What they have seen lately will not give them comfort. The sudden and rapid collapse of popular crypto projects sheds light on the house-of-cards nature of many crypto products and provides the perfect “told you so” moment for already-wary regulators.

Tracy Basinger is a senior adviser at Klaros, a financial advisory and investment firm.

Jonah Crane is a partner at Klaros.

First, in early May, TerraUSD, an algorithmic stablecoin, rapidly collapsed, erasing billions of dollars of value in just a few short days. Then Celsius halted redemptions by customers who had deposited funds, and is believed to be nearing insolvency. The drastic moves by Celsius – and forced liquidations of leveraged positions – roiled crypto markets. Bitcoin briefly touched $20,000 and is down more than 70% since its November 2021 peak.

These debacles and the uneasiness they have caused will likely instill regulators and policymakers with a new sense of urgency to address issues that have gnawed at the crypto industry. But these problems and the decline in crypto prices could also present a great opportunity to create a clearer path forward. They come against a backdrop of already-accelerating regulatory pressure.

What regulators have said

In August 2021, the federal banking agencies launched crypto “sprints” and, in the fall of 2021, laid out their agenda for 2022. In November 2021, the President’s Working Group on Financial Markets (PWG), released a report detailing risks associated with stablecoins, including the risk of a panic akin to a bank run, and called on Congress to pass new legislation limiting stablecoin issuance to insured banks. Then in March 2022, President Biden issued an executive order on digital assets. The report acknowledged potential benefits of innovation in digital assets, but emphasized the downsides: The word “risk” appeared 47 times.

Read More: As Federal Agencies Organize, US States Continue to Lead in Regulating Digital Assets

A wide range of state and federal regulators have weighed in following the implosion of Terra, and again following Celsius’ troubles and the broader market collapse. After the Terra collapse, U.S. Treasury Secretary Janet Yellen called for a “comprehensive framework” governing stablecoins and urged Congress to act. Subsequently, the SEC was reported to be investigating the marketing of TerraUSD by Terraform Labs.

Just days after Celsius halted redemptions, Securities and Exchange Commission (SEC) Chairman Gary Gensler cautioned that crypto platforms promising high returns may be too good to be true. Meanwhile, state securities regulators in Alabama, Kentucky, New Jersey, Texas and Washington have opened an investigation into Celsius’ actions. After Terra’s failure, Gensler announced the agency would add 20 investigators and litigators to its unit dedicated to cryptocurrency and cybersecurity enforcement.

In addition, more than 40 states have some type of crypto legislation in place or pending in their legislature. And California Gov. Gavin Newsom recently issued an executive order on cryptocurrencies, mapping out a comprehensive regulatory framework for digital assets.

Ghosts of financial crises past

This latest market crash reveals just how much consumers could lose – two trillion dollars of crypto asset’s market cap have been wiped out. And both Terra and Celsius provide glaringly bad examples of the fragile financial engineering mixed with hyperaggressive promotion that has led regulators to see echoes of past financial crises.

The collapse of the Terra stablecoin and resulting market volatility will leave regulators who have been warning of the risks associated with crypto feeling vindicated. Terra experienced the equivalent of an old-fashioned bank run when investors began to lose confidence that they would always be able to redeem their token for a dollar. That’s exactly what the PWG (and many others, including Sam Bankman-Fried) warned would happen.

Moreover, Terra achieved its scale (roughly $18 billion in circulation at its peak) because it could be deposited into a yield protocol and earn up to 20% interest. Acting Comptroller of the Currency Michael Hsu recently compared yield farming to Ponzi schemes – and he’s not alone. The Anchor Protocol promised UST depositors 20% yields, with no realistic way to continue paying out interest if money stopped flooding in. Celsius used its borrowed assets as collateral to borrow more and make a series of risky bets – including investing in the Anchor Protocol – in search of returns to meet its promise to pay “depositors” 8%.

Read More: Defining Cryptocurrency Regulation Important for the Industry to Grow: Morgan Stanley

Finally, both Terra and Celsius caused volatility across crypto markets – a foreshadowing of the significant spillover effects that might occur if, say, Tether were to collapse. This kind of financial contagion risk is exactly what regulators try to prevent.

How to prepare

At this point, crypto companies should assume regulation is inevitable. If the industry wants to help itself, it must be at the table. But more than that, industry leaders must be willing to overhaul the way large portions of these markets work.

On stablecoins, industry leaders should clearly distinguish among different models and begin a dialogue about the ways in which certain models, and certain regulatory reforms, could achieve the regulators’ policy objectives. Amid the Terra crash, the market clearly viewed certain stablecoins – namely, 100% dollar-backed coins – as more stable than others. And yet Tether, which has broken the buck multiple times in recent weeks, remains a critical element of a major portion of crypto market activity.

For their part, regulators, too, should begin to recognize that not all stablecoins are created equal. Regulators were right to warn of “run risks” inherent in stablecoins, but have done little to distinguish between stablecoins and “unstable” coins. The New York Department of Financial Services, which regulates two stablecoin issuers, released public guidance requiring stablecoin reserves to be held in safe and liquid assets and be subject to independent attestations. This guidance provides an excellent foundation for developing a truly stable framework.

Hsu issued a call for public-private collaboration on developing stablecoin standards. That is an invitation the industry should accept.

More broadly, there needs to be a reckoning within the industry. The desire for open and decentralized crypto markets makes many participants averse to prescriptive rules. But inherently fragile products have served to accelerate and multiply the damage of a crypto downturn. Industry leaders should take advantage of the crypto winter to clear the underbrush that could be the kindling for the next inferno. It’s time to recognize that many products simply aren’t consistent with fair and orderly markets.

Read More: Here’s the Full Text of Biden’s Executive Order on Cryptocurrency

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.