- Despite the recent slump in the cryptocurrency market, Bitcoin and Ethereum are the two most essential blockchains. Know what is coming in 2022 for these two blockchains.
The first two months of 2022 brought big surprises for the financial markets. Economic and geopolitical conflicts wreaked havoc worldwide, but cryptocurrencies continued to do well through May and have been on the downside. What do the next few months hold for Bitcoin and Ethereum, the two most essential blockchains?
Bitcoin and Ethereum: Kings of Cryptocurrencies
- Why do Bitcoin and Ethereum Dominate the Cryptocurrency Market?
- Jerome Powell threatens to raise interest rates
- Russians and Ukrainians exchange their money for Bitcoin and Ethereum
- Bitcoin, Underrated Digital Gold
- Ethereum, the Leader in NFTs and Metaverse Platforms
- Major Decline in Cryptocurrencies
- Forecasts for the remainder of 2022
- Impact of Bitcoin and Ethereum on the Digital World
Why do Bitcoin and Ethereum Dominate the Cryptocurrency Market?
Bitcoin dominates 40% of the global cryptocurrency market, while Ethereum comes in second with 18%. They own almost 60% of the total value with the economic equivalent of 1.2 billion dollars. Bitcoin and Ethereum are the blockchains that drive the market and set up or downtrends.
Bitcoin is the first blockchain and cryptocurrency that is known as digital gold. For its part, Ethereum is the king of smart contracts that support the development of different decentralized finance protocols, scalability solutions, NFT marketplaces, stable currencies, and metaverses.
Jerome Powell threatens to raise interest rates
Economic conflicts worldwide have a substantial impact on financial markets and cryptocurrencies. The future of economic policies and the changes announced by world powers such as the United States and China is of the utmost importance for the stability of the crypto world.
Jerome Powell, chairman of the US Federal Reserve, announced that he would raise interest rates at the end of March in the first weeks of January. This news had a severe impact on the traditional and crypto financial markets. Bitcoin fell 30%, while Ether, the native currency of the Ethereum blockchain, fell 40%.
Months later, in the first days of March, Powell announced a possible 0.25% increase in interest rates. Despite the cryptocurrency market gaining some ground due to the conflict between Russia and Ukraine, this news put off many investors. The value of Bitcoin and Ether dropped 6% at the beginning of the month.
Inflation against the dollar reached an all-time high of 7.5%, which had not occurred in more than 40 years, thus creating an uncertain future for the world market. Powell’s announcements and how he handles the US economy significantly impact the cryptocurrency market.
It is nothing new, as the US dollar is the strongest fiat currency. Although Bitcoin and Ether recover better than any other, their future is uncertain for the rest of the year.
Russians and Ukrainians exchange their money for Bitcoin and Ethereum
The political conflicts between Russia and Ukraine became tenser and tenser until the armed conflict finally broke out with the Russian invasion on February 24, 2022. From this event, the cryptocurrency market regained ground. Bitcoin increased its price by 20% and Ethereum by 25%.
The impositions of the Treasury Department of the United States towards the Russian central bank drastically affected the country’s economy. In less than 24 hours, the Russian ruble fell 20% and ended up at a price of less than one cent. Many Russian citizens bought large amounts of cryptocurrencies to protect themselves against the inflation of their currency as their country’s economy was affected.
The purchase volume of Bitcoin from the collapse of the Russian ruble amounted to 140 million dollars in 24 hours. The last time the volume of cryptocurrency purchases in Russia was so high was in the first months of the pandemic in 2020. On the other hand, Ukrainian citizens also resorted to this monetary system to protect their money and efficiently get it out of the country.
Russian and Ukrainian citizens bought mainly in BTC and USDT, a stable coin pegged to the dollar’s value issued on the Ethereum network. This conflict exposes the difficulties of fiat currencies and highlights the qualities of cryptocurrencies, especially the Bitcoin and Ethereum blockchains.
Donations in Cryptocurrencies for Ukraine
Bitcoin and Ethereum are always present as alternative exchange currencies. In this case, through its official Twitter, the Ukrainian government posted that the country is accepting donations in Bitcoin and Ethereum. In this way, they can get donations almost instantly, bypassing government restrictions on exchanging fiat currencies.
After receiving the donations mentioned above in Bitcoin and Ethereum accounts, the Ukrainian government announced that it would carry out an airdrop for all donors. A day later, Mykhailo Fedorov, Ukraine’s deputy minister and the country’s Minister of Digital Transformation, posted on Twitter the cancellation of the airdrop; instead, a series of NFTs will be launched to support the Ukrainian armed forces.
Bitcoin, Underrated Digital Gold
As stated before, Bitcoin, the most important digital currency, dominates 40% of the entire market. Several analysts consider the first blockchain as a commodity below its current price. Both Bukele, president of El Salvador, and Michael Saylor, investor, and CEO of Microstrategy, see Bitcoin as an essential digital asset for a country’s reserves and a tremendous institutional investment.
The market capitalization of Bitcoin compares to that of gold, although this mineral has a market capitalization of 12.3 trillion dollars, while Bitcoin of 560 billion. In any case, Bitcoin acts as a store of value like gold did, so it is the most crucial asset of the digital age.
Ethereum, the Leader in NFTs and Metaverse Platforms
The second most crucial blockchain in the cryptocurrency market, Ethereum, continues to gain market share thanks to NFTs and the advances of the metaverse. In January of this year, Twitter announced the possibility of changing the profile picture for NFTs minted on the Ethereum network.
In turn, it implemented the option to receive tips on this network. It suggests that Twitter trusts Ethereum since it has implemented these functions only for this blockchain.
On the other hand, the boom of NFTs on the OpenSea platform happened in January. The NFT marketplace generated more than 5 billion dollars in sales, and 95% occurred on the Ethereum blockchain. The NFT market is growing every day, and Ethereum dominates it, as it has the top 10 collections by market capitalization.
Both The Sandbox and Decentraland are the most relevant metaverses based on their market capitalization, which amounts to 8 billion dollars. They were created on the Ethereum network and use the blockchain for transactions of their native currencies and NFTs created.
NFTs, metaverse projects, stablecoins, and decentralized finance platforms use the Ethereum network as a secure, stable, and decentralized blockchain. Even though several blockchains and projects are trying to move away from Ethereum, the blockchain is imposing itself more and more intensely.
El staking es un método para ganar criptomonedas generando ingresos extra, formando parte del procesamiento de transacciones de la blockchain.
Major Decline in Cryptocurrencies
In May, an economic collapse also devastated the crypto market. Bitcoin dropped by 32%, going from 39 thousand 753 dollars to 25 thousand 420 dollars in less than a week, which had not happened since December 2020. With the fall of the last few days, the BTC has lost 61% in its value since the historical maximum that it reached on November 10, 2021, when it cost almost 69 thousand dollars. Currently, it has a value of 29 thousand 534 dollars.
For its part, Ethereum also fell 44%, and on May 12, it reached $1,748, its lowest value of the year. Currently, the cryptocurrency is worth $1,979.
Forecasts for the remainder of 2022
Although the expectations at the beginning of the year were positive regarding cryptocurrencies, especially Bitcoin and Ethereum, current times are complicated for the economy. After the shock of May, what is in store for these cryptocurrencies for the rest of the year?
Bitcoin. Although most experts believe that the cryptocurrency will continue to decline, few dare to give figures of what will happen to Bitcoin in the coming months. Analyst Nakamotolisk stated that according to the trend of the cryptocurrency and taking into account its behavior since 2012, bitcoin could fall to 17,000 dollars, and then return to a record high of 70,000 dollars.
Ethereum. Although at the beginning of the year, it was believed that this cryptocurrency could reach $7,500, the predictions have changed for Ethereum, and they are not very encouraging. Experts assure that the cryptocurrency will continue to fall to a thousand dollars.
Impact of Bitcoin and Ethereum on the Digital World
Bitcoin and Ethereum are the two leading cryptocurrencies consolidated as new economic assets in the digital world. Although currencies are less than a decade in the making, Bitcoin and Ethereum laid the foundation for decentralized digital money and smart contracts.
The world is becoming more and more digital. Our jobs and our relationships constantly occur through a screen. Likewise, currencies migrate towards virtuality. They must resemble functional models, as the Bitcoin and Ethereum systems have shown, unlike the CBDCs that central banks and governments promote, like the Chinese yuan.
Developers and investors look to Bitcoin and Ethereum as neat examples of cryptocurrencies; they consider that they will get out of this pothole and continue their growth. An essential part of stabilizing the crypto market is mass adoption; these investment goods need to reach the general public.
The trends of both cryptocurrencies fluctuate day by day due to geopolitical and economic conflicts. However, they are still the best digital investment instruments of the last five years.
Updated on May 25, 2022, by Sarahy Uribe.
Translated from Spanish on May 27, 2022.