The Bitcoin (CRYPTO: BTC) price is down 4.4% over the past 24 hours, having earlier been down more than 6%.
One Bitcoin is currently worth US$43,356 (AU$58,377).
The past two days of retreat have mirrored losses among risk assets like high growth tech shares. This selloff has the S&P/ASX All Technology Index (ASX: XTX) leading the way lower, down 3% in intraday trading.
With the overnight losses, the world's original crypto is now down 8% since this time last week and down 9% year-to-date.
Yet, while still in the red for the calendar year, the Bitcoin price has marched 23% higher since 24 January, when it traded for US$33,184, according to data from CoinMarketCap.
That's the recent price action in a nutshell.
But what can crypto investors expect from the Bitcoin price over the coming months?
Image source: Getty Images
What's ahead for the Bitcoin price in 2022?
Ian Lowe is the CEO of crypto wealth platform Dacxi.
Asked what could impact the Bitcoin price over the coming months, Lowe told The Motley Fool:
Institutional adoption will continue to push prices higher. Bullish undertones rippled through the market last Tuesday as the co-founder of Terra (CRYPTO: LUNA), Do Kwon, announced that Terra is commencing the accumulation of US$10 billion worth of Bitcoin as a reserve asset for its stablecoin TerraUSD (CRYPTO: UST).
Lowe added:
The institutionalisation of Bitcoin was further highlighted last week, when Goldman Sachs conducted its first Bitcoin OTC transaction, and reports of Ray Dalio's giant hedge fund, Bridgewater, backing a crypto fund were released.
A US-listed Bitcoin ETF and looming regulations
Josh Gilbert, crypto analyst at multi-asset investment platform eToro, pointed to the potential launch of a Bitcoin exchange traded fund (ETF) in the United States' markets as a strong potential tailwind for the Bitcoin price in 2022.
"A US spot bitcoin ETF is still on the radar for next quarter. Although there is no confirmed launch date, interest-only continues to soar," he told us.
"As some of the world's largest financial institutions, such as BlackRock, are now beginning to make crypto available for their clients, a spot Bitcoin ETF is expected to make investing in Bitcoin much more straightforward," he added.
But Gilbert cautioned of potential headwinds over the coming months that could drag on the Bitcoin price.
"I'd be watching for further conversations around regulation, particularly outside of the US," he said.
According to Gilbert:
US President Joe Biden recently issued his executive order on Ensuring Responsible Development of Digital Assets. Although it's unlikely we will see the full transition pan out in Q2, any negative discussions in Congress could see the Bitcoin price drop.
Rising utility and stronger hands a tailwind for the Bitcoin price
Daniel Sekers is the managing director of crypto trading platform YourPortfolio.
Commenting on what could send the Bitcoin price higher, Sekers told The Motley Fool, "We are seeing the utility of Bitcoin starting to be used as an underlying security to altcoins. Last week saw the LUNA Foundation Guard buy up US$3 billion of Bitcoin to back their dollar-backed stablecoin."
Sekers pointed to the havoc caused by Russia's invasion of Ukraine as also likely to support the Bitcoin price over the coming months:
We have again seen a marked increase in Bitcoin transactions in Europe, we assume fuelled by the conflict in Ukraine. Some of this flow can be attributed to aid flowing into Ukraine, but it would also be reasonable to assume that some of it is being used to avoid Russian sanctions. I would expect the use of cryptocurrencies in the region will continue to fuel price increases in the asset.
He also noted that more Bitcoin looks to be held by what equity investors call 'strong hands'. Namely investors unlikely to sell at the first sign of weakness.
"In the last 30 days, an analysis of the blockchain via forensic analysis platform Chainalysis shows 0.9% increase in Bitcoin being held by what is considered to be 'illiquid pools' which may have an inflationary impact on the Bitcoin price," he said.
As for what could drag Bitcoin lower over the coming months, Sekers said, "There is nothing like a tweet from Elon Musk to move the Bitcoin price, but we are never really certain of his motives. Tesla holds almost US$2 billion in Bitcoin but that didn't stop Elon commenting on the energy consumption of the coin putting downward pressure on the price."
Then there's the uncertainty surrounding upcoming regulations, which can potentially depress Bitcoin's performance in the shorter-term. "In the long run this will likely support the Bitcoin price with mass market adoption, but in the short term, the uncertainty of regulation may create a state of flux," he said.
But the biggest risk to the Bitcoin price, according to Sekers, is the cost to produce and transact the token, which could see a jump in supply.
"With energy prices heavily inflated, crypto-miners that aren't relying on more stable renewable energy sources will have inflated mining costs," he said.
Sekers continued:
We see miners react to these fluctuations like any other commodity producer, in that they will decrease their mining operations and increase outflow of reserves. Where it differs with crypto is that miners will release more crypto into the market creating more liquidity, hence increasing supply.
For the miners, especially with an elevated price, this allows them to offset the increased price of production. In the last week, we have seen a marked increase in miners moving Bitcoin to exchanges, as such increasing supply.
