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Deflationary Crypto Assets Perform in 2022 Amid Inflation Woes: Bloomberg Outlook

2 mins
Updated by Kyle Baird
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In Brief

  • Bloomberg predicts a healthier crypto regulatory outlook in 2022.
  • Bitcoin and Ethereum will benefit from "deflationary forces."
  • U.S. inflation is a frightening 6.8% — the highest rates in 40 years.
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Analysts at finance news giant Bloomberg have eyed deflationary crypto assets such as Ethereum as maintaining bullish momentum throughout the upcoming year.

Crypto markets are currently still in retreat and have now declined 23% from their total capitalization all-time high of just over $3 trillion on Nov 9. Analysts at Bloomberg are unperturbed, however, and have predicted that deflationary digital assets could continue their bullish momentum into 2022.

In its “Global Cryptocurrencies Outlook 2022” report, Bloomberg senior commodity strategist Mike McGlone has outlined some predictions for the coming year.

He also stated that analysts expect the regulatory situation in the United States to improve next year:

We expect the U.S. to embrace cryptocurrencies in 2022, with proper regulation and related bullish price implications,

Deflationary crypto forces  

The economics strategist went on to state that “deflationary forces” would be good for cryptocurrencies like bitcoin and Ethereum momentum, especially if the Federal Reserve continues with its meddling with bond yields with are in decline.

Crypto assets showing divergent strength vs. equities near the end of 2021 may portend continued digital-asset outperformance in 2022.

The bitcoin supply is rapidly running out with 90% of the available coins, or 18.89 million BTC now in circulation. Meanwhile, Ethereum is poised to flip to deflationary issuance in a couple of months’ time when “the merge” switches to proof-of-stake consensus. At current burn rates of more than 6,000 ETH per day, a simulation of the merge puts ETH supply growth at -1.5% per year.

McGlone went on to state that fund managers will be facing increasing risks if they do not have any portfolio allocation to crypto. He added that crypto markets are consolidating in a bull run that is expected to continue into 2022.

The Bloomberg analysts have predicted that BTC will hit six figures next year, driven by demand and supply;

Bitcoin appears to be on a trajectory for $100,000. We see it as more of a question of time, notably due to the eonomic basics of increasing demand vs. decreasing supply.

Inflation woes persist

Central banks have been printing money at unprecedented rates in order to keep their pandemic battered economies afloat. This has resulted in surging inflation rates, and costs for consumers, across the globe.

The U.S. inflation rate is currently 6.8%, as of the end of November. This is the highest it has been since 1982 according to the inflation calculator. These frightening figures are an indication that the situation is not “transitory” despite what the Federal Reserve claims.

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Martin Young
Martin Young is a seasoned cryptocurrency journalist and editor with over 7 years of experience covering the latest news and trends in the digital asset space. He is passionate about making complex blockchain, fintech, and macroeconomics concepts understandable for mainstream audiences.   Martin has been featured in top finance, technology, and crypto publications including BeInCrypto, CoinTelegraph, NewsBTC, FX Empire, and Asia Times. His articles provide an in-depth analysis of...