Analysts in crypto market are touting the possibility of a green first-week on crypto markets in January, part of what Alex Kruger (economist and trader) calls the “first weeks of the year effect”.
Kruger noted in a December 29 tweet that Bitcoin (BTC), for the past four consecutive years, has enjoyed positive returns within the first week January. These range from 7% to 36% in 2018 and 2021.
BTC increased from $28,653 in Jan 2021 to $41,441 the following week.
Kruger answered, “tbf only 2020 & 2021 matter, markets are different, so use those data points as much as you like”.
Expect a strong crypto market to rebound in January due to fund inflows. If the January/12 inflation print is too hot, then you should be cautious ahead of the FOMC (Jan/26)
— Alex Kruger (@krugermacro) December 28, 2021
His optimism for January is based on his expectation of strong fund inflows, which seems to align with Raoul Pal, Real Vision CEO. Pal stated in a Youtube interview that he believes the Bitcoin sell-offs are over and that January will be strong as institutional capital is reinvested into the market.
David Lifchitz, CEO of ExoAlpha believes that institutions are still selling even though there is less than 24 hours left in 2021 to lock in tax loss. The phenomenon could also be associated with a rebound in Januarys first week.
Nigel Green, CEO of deVere Group, a wealth management and fintech firm believes that December is the worst month for Bitcoin since May 2021. This is due to “panic sellers literally giving away their cryptocurrencies in order to wealthy buyers.”
However, he is optimistic about the markets largest cryptocurrency for the long-term. Green believes that Bitcoin can protect investors against global inflation and that “borderless global decentralized currencies” are the future.
However, not everyone is bullish about crypto in 2022.
CNBC spoke with Carol Alexander, Professor of Finance at Sussex University. She said that BTC could plummet as low as $10,000 in 2022. However, she is skeptical about BTCs fundamental value and believes it has already hit its peak in this cycle.
Related: MicroStrategy acquires 1,914 Bitcoin. Now holds nearly $6B in crypto
Todd Lowenstein from Union Bank, chief equity strategist, offers a more informed view. According to Todd Lowenstein, chief equity strategist at Union Bank, “Goldilocks conditions” such as financial stimulus packages COVID and low interest rates which benefited high asset values are ending. This will have a significant impact on BTC markets and traditional ones in 2022.
“Goldilocks conditions have ended and the liquidity tide has receded which will disproportionately hurt overvalued asset class and speculative areas on the market, including cryptocurrencies.”