Bitcoin Quarterly Report: Q1 2022

The first quarter of 2022 saw increased institutional demand for cryptocurrencies. Numerous multinational companies are actively exploring how to adopt blockchain and cryptocurrencies.

To keep up with the digital economy, many countries have drafted new regulatory frameworks.

While fundamentals have improved, Bitcoin and Ethereum ended the first quarter of 2022 at $45,506 and $3,281.42, respectively.

Geopolitical and macroeconomic uncertainties have an impact, but capital continues to flow into digital assets. Institutions appear to have accelerated the buying frenzy, giving lawmakers a resolve to improve regulation.

Governments are gradually realizing that cryptocurrencies play an important role in investor decision-making. As the blockchain industry “explodes by leaps and bounds,” the U.S. appears to have found a new way to regulate digital assets.

In the first quarter of 2022, retail investors have been on the sidelines, worried about volatility. In the long run, the market situation is better than ever, and institutional betting continues to increase.

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Cryptocurrencies are in high demand

Regardless of market volatility, institutional interest in cryptocurrencies in the first quarter of 2022 continues to run high.

Wall Street banks such as Jefferies, Canaccord Genuity and Credit Suisse have decided to form research teams to explore the development of new technologies in the blockchain space. Meanwhile, U.S. tech giants such as Google, Uber and PayPal are said to be considering accepting cryptocurrencies as demand from users and merchants continues to escalate.

According to a survey conducted by the multinational investment bank Goldman Sachs, these companies will be accepting cryptocurrencies in the near future. Goldman Sachs revealed that more than 60% of clients expect banks to increase digital assets. As a result, Bitcoin will further grab gold’s market share. The investment banking giant predicts that if the price breaks the $100,000 mark, bitcoin will take over half of the “value store” market.

With growing expectations, major financial institutions are adapting their products to meet market demands. The Chicago Mercantile Exchange has launched miniature bitcoin and Ethereum options contracts. South Korea’s largest bank, Kookmin Bank, has drawn up a plan to launch cryptocurrency exchange-traded funds and cryptocurrency derivatives. The tools are designed to allow “market participants to accurately predict events that affect market movements and prevent losses by increasing flexibility.”

However, investors seem to all recognize the importance of holding real crypto assets, leading to a surge in buying pressure in the first quarter of 2022.

MicroStrategy bought 660 bitcoins for about $25 million, Luna Foundation Guard added 42,410 bitcoins, El Salvador bought 410 bitcoins, and even the U.S. Senate bought about $50,000 worth of bitcoins.

Additionally, Canadian professional services firm KPMG has included bitcoin and ether in its corporate wealth asset allocation. The mayor of Rio de Janeiro, Brazil, Eduardo Paes, revealed that the city government plans to invest 1 percent of its fiscal reserves in cryptocurrencies. New York City Mayor Eric Adams made headlines after receiving his first paycheck in cryptocurrency.

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Seek advantage and avoid disadvantage

In the first quarter of 2022, the importance of cryptocurrencies in investor decision-making cannot be underestimated. U.S. Treasury Secretary Janet Yellen believes that cryptocurrencies have achieved “growth by leaps and bounds.” Many countries, including the United States, have made great strides in regulating this emerging asset class, providing strong support for the continued development of the blockchain industry.

U.S. President Joe Biden issued an executive order “Ensuring the Responsible Development of Digital Assets.” He called for a broad scrutiny of digital assets and proposed six major goals, including protecting the safety of consumers and investors, maintaining financial stability, combating illicit financing and reducing national security risks, maintaining a leading position in the international financial system and economic competition, Financial inclusion and responsible innovation.

The Bank of England has begun drafting a regulatory framework for crypto assets. The Advertising Standards Council of India has published guidelines for cryptocurrency-related advertising. Legislators in Panama have also begun exploring cryptocurrency regulation to ensure the country keeps pace with the digital economy. Georgia has drafted proposals for legislative changes for cryptocurrency company registration, business licenses, compliance testing, and anti-money laundering regulations.

While geopolitical and macroeconomic uncertainties will affect the cryptocurrency market in the coming months, the first quarter of 2022 marks the beginning of the global adoption of blockchain technology, a milestone.

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Bitcoin Q1 2022 Review

In the first quarter of 2022, Bitcoin opened at $46,210.60. The quarter has largely consolidated around $10,000, as defined by the 200- and 100-day moving averages on the 3-day candlestick chart.

Every time Bitcoin dipped to the 200-day moving average, the market felt massive buying pressure before bouncing back to the 100-day moving average. Bitcoin usually finds rejection at this point of resistance before falling back to support.

In the last week of the first quarter of 2022, the cryptocurrency leader Bitcoin successfully broke through the 100-day moving average on the 3-day candlestick chart, but failed when it broke through the 50-day moving average. The rejection led to a pullback, prompting a drop in the price of Bitcoin, which finally ended the first quarter of 2022 at $45,506.

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Support and Resistance

Spot market trading history shows that throughout the first quarter of 2022, Bitcoin established a solid floor of support around $41,095.40, with some 6 million addresses buying more than 3.21 million bitcoins around that price. On the other hand, more than 6.15 million addresses that bought 3.43 million bitcoins at an average price of $47,486.73 in the fourth quarter of 2021 are still stuck.

The demand zone at $41,095.40 and the supply zone at $47,486.73 are crucial and help clarify where Bitcoin is headed in the coming quarters.

A quarterly close below support plays a decisive role, potentially triggering panic selling among investors, leading to a correction to $30,000 or lower. However, if the resistance level is broken, Bitcoin can encourage wait-and-see investors to return to the market, pushing the price to $60,000 and even new all-time highs.

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Network growth

Insights into the behavior of retail investors are based on the number of new addresses created daily on the Bitcoin network. As new capital floods into the market, network growth is steadily rising, often driving up prices. However, a shortage of new addresses can affect network liquidity, thereby pulling prices down.

The first two months of Q1 2022 have seen a downward trend in the number of new addresses added daily, and retail concerns appear to have subsided. It wasn’t until late February that the Bitcoin network began to expand, reaching a quarterly high on March 27, with more than 480,000 new Bitcoin addresses.

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Supply and demand

Institutional attention shows a similar trend. The number of large deals worth over $100,000 reflects the behavior of big players and whales.

After falling for more than two months, the on-chain metric bottomed out on March 13, with 13,652 large-value transactions. Since then, large-value transactions hit a new quarterly high of 23,544 on March 28, as the network set a new series of record highs and lows, indicating a resurgence in institutional attention.

While demand from retail and institutional investors is on the rise, the number of bitcoins on exchanges has dwindled significantly. About 93,378.18 bitcoins were withdrawn from well-known cryptocurrency exchange wallets. From March 4 to March 31, the number decreased by 3.63%.