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A review of the biggest macroeconomic developments that affected bitcoin last year, and those that will shape it in 2022.
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In this episode of Bitcoin MagazineThe podcast for “Fed Watch” Christian Kerolis and I recorded live on YouTube as part of the magazine’s near-daily live stream. This week we reviewed the top trends and news for 2021 and then dived into our 2022 Trend predictions.
Bitcoin and Macro Review 2021
Keep in mind that a lot of things have happened in Bitcoin this year, but these have been the biggest trends and events from a coin/macroeconomic perspective.
First and foremost, we have El Salvador’s move to add bitcoin as a legal tender alongside the US dollar. It was announced at the Bitcoin 2021 conference in Miami and immediately received applause from bitcoin as well as criticism from traditional gatekeepers such as the International Monetary Fund (IMF) and the World Bank. We spent a few minutes discussing different aspects of the El Salvador news and President Bukele himself. If there was a “Bitcoin Man of 2021” it would probably be him.
The second most influential event of 2021 was the bitcoin ban in China. After years of ups and downs with partial bans, the Chinese Communist Party (CCP) finally did, banning bitcoin services and companies in May. This led to the migration of bitcoin miners from China, mainly to other countries in Central Asia and the United States, so the other half of this story is the rise of the bitcoin mining industry in the United States. But now the United States is the largest mining country in the world. A title you won’t likely give up for decades to come.
No review for 2021 would be complete without including supply chain issues and what most people call “inflation.” This was certainly a major theme in 2021 in macroeconomics – the economy peaked at the end of the first quarter and the rest of the year was dominated by slowing fundamentals and rising prices.
A quick look at Google’s trends since the Great Financial Crisis (GFC) shows that global interest in the term “inflation” has reached its highest levels since then, and in the US in particular, inflation concern was greater than the GFC when the Federal Reserve embarked on this current path for quantitative easing (QE).
You can hardly go a day in the second half of the year in financial circles without inflation being the main topic. However, note that this has also been the worst supply chain disruption in the last 75 years. With so much of the world shutting down for months in 2020 and 2021, it’s no wonder prices have soared modestly. Surprisingly, however, is that the price hike has not been more dramatic. Several months of inflation of nearly 1% the reason for all this?
Finally, for 2021, we discussed the trends in stablecoins and altcoins. In the past year, we’ve seen a clear separation in both areas. As for stablecoins, we have seen the Fed deviate from the European Central Bank (ECB) and other central banks by not demonizing stablecoins and strong central bank digital currencies (CBDC). This highlights a fundamental conflict of interest that arises among central banks around the world. As for altcoins, they have broken away from the typical relationship with bitcoin. In previous eras, altcoins could have been pumped and sunk against bitcoins, however, NFTs, which are much less liquid than altcoins of the coin type, are not easily sunk against bitcoins. This locks up value in scams and prevents Bitcoin from taking advantage of intense speculative cycles.
Bitcoin and Macro Predictions for 2022
Now, for some fun stuff. If you’re a regular listener of “Fed Watch,” not many things will surprise you. Here are the highlights, but you’ll have to tune in to hear all of our predictions.
We believe that the most dominant trend for 2022 will be an escalating crisis in Europe. The European debt crisis started very quickly after the global financial crisis, and in the current financial crisis we expect to see a European debt crisis 2.0. This is a big problem as Europe’s relationship with the US and the Federal Reserve has fractured, and some internal divisions are starting to emerge.
A more specific political prediction we have for 2022 is that the media and politicians will start moving more towards the center. This is in line with the timeline of the Fourth Transformation, the multigenerational cycle that ends with the return to the center politically and the renewal of institutions and society. Those countries that are not capable of “reform” (I’m looking at you CCP and Brussels), will face high levels of civil unrest or revolution. 2022 is the year this becomes clear.
Next year will also see at least one more country adopt bitcoin using the El Salvador scheme. We speculate on which countries this could be. I raised Latin American countries like Ecuador and Panama because they both use the US dollar similarly to El Salvador. Kyrolis raised the African country of Tonga. There are many options, some of which are already showing interest in bitcoin.
This is a guest post by Ansel Lindner. The opinions expressed are their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.