The third week of unrestrained fun in the cryptocurrency market has started. Digital assets have begun the final stage of correction, after which the upward movement should resume. This is evidenced by the beginning of the stage of active purchasing and increasing the on-chain activity of the main cryptocurrencies. However, it is not worth expecting the start of a full-fledged market rally before 2022. At the same time, there are more and more announcements indicating that, in general, 2022 will not be as bright in terms of growth as 2021.
The main trend of the fourth quarter of 2021 was the total awareness by states of the importance and weight of cryptocurrencies and related sectors of the digital economy. I assume that in 2022 the dynamics of cryptocurrency adoption will strengthen, but it will be painful for investors. In 2021, the market is pessimistic about any attempts to regulate the cryptocurrency market. However, more and more governments are developing programs to regulate digital coins.
Due to worsening inflation, the Bank of England announced that it will begin implementing tough cryptocurrency market regulation next year to protect the economy. A similar position was expressed by the authorities of developed countries such as Spain, Sweden, and Switzerland. In the long term, market regulation will have a positive effect by significantly expanding the institutional and retail audience. However, at the current stage, the market needs to be prepared for an increase in volatility and the prevalence of pessimistic sentiments.
This is also evidenced by the disappointing forecast of Jurrien Timmer, director of global macro at Fidelity Investments, who believes that Bitcoin will only reach $100k in 2023. Based on Timmer's own supply and demand model, BTC showed a downward trend when the number of retail traders approached 30%. As of December 20, the number of such traders is only 15%, which indicates the bullish potential of the Bitcoin market. However, after the euphoric forecasts in the fall of 2021, the current forecast looks pessimistic.
At the same time, it can be found consistent if one adheres to the five-wave theory of Bitcoin price growth. As of December 20, Bitcoin is in the midst of a fifth and final wave of growth. It is expected to last most of the first quarter of 2022. However, subsequently, the market will face a large-scale correction, which in previous periods took more than 80% of the high of the bull market. Given this information, BTC/USD could indeed hit $100k after being in a prolonged bear market that will take most of 2022 and 2023.
Meanwhile, the first cryptocurrency is still within the wide range of $40k-$50k. Bulls have resumed the accumulation process, but still do not take active actions, and therefore the price continues to decline. The coin has every chance to resume the upward movement and begin to realize the potential for growth at the end of 2021, but for this, the coin needs to gain a foothold above the $52k mark. This will mean a bullish breakdown of the downward resistance line and a reversal of the local trend.
In case of the further successful storming of $58k, the asset will break the medium-term downward trend and resume recovery as part of the movement in the fifth wave of growth. However, there still is a chance to test the bottom in the range of $42k-$45k. To confirm bullish intentions, the asset needs to gain a foothold above $52k within the current week.
