If you caught the 2021 Crypto Roundup on this site, then you’ll know that this was a pretty good year for crypto, with the entire crypto market growing to a combined $2 trillion in value. It was a year that saw the first major crypto company go public with the Coinbase IPO in April, and NFTs took the centre stage in style. At the same time, heightened regulatory scrutiny and intense price fluctuations did certainly pose a challenge. With next year already looking like another roller-coaster waiting to take off, let’s take a look at what analysts have to offer as predictions.
A bit of a warning beforehand, though – please do take these with a grain of salt – nobody can be certain about the future, and when it comes to crypto, things only get more uncertain than ever. Some experts believe that bitcoin is due for a sharp decline in the coming months. Bitcoin surged to a record high of almost $69,000 in November, but is now sitting down by almost 30% from that peak. A decline of 20% or more from recent highs is normally said to be bearish, but it’s worth noting bitcoin’s notorious volatility does a good job of undermining conventional notions. Some actually expect bitcoin to the tank to be as low as $10,000 in 2022, virtually wiping out all of its gains in the past year and a half. They claim that bitcoin “has no fundamental value” and serves as more of a “toy” than an investment. This claim is further backed by the fact that In 2018, bitcoin tumbled close to $3,000 after almost hitting $20,000 just a few months earlier.
However, bitcoin backers say that things are different this time, as more institutional investors are jumping into the market. A common investment case for bitcoin is that it serves as a hedge against rising inflation caused by government stimulus. But skeptics are quick to point out that with Goldilocks conditions ending and the liquidity tide receding, overvalued asset classes and speculative areas of the market including cryptocurrencies would be hit hard. Will the crypto party actually end in 2022? I guess we’ll have to wait and see. A big development crypto investors are on the lookout for in 2022 is the approval of the first spot bitcoin exchange-traded fund. Though ProShares’ Bitcoin Strategy ETF is already up and about, the product tracks bitcoin futures contracts rather than giving investors direct exposure to the cryptocurrency itself. Futures are financial derivatives that oblige an investor to buy or sell an asset at a later date and for an agreed-upon price. Experts opine that by tracking futures prices instead of bitcoin itself, ProShares’ ETF could be too risky for novice traders, widely regarded as not very retail-friendly. Instead, experts vouch for a Bitcoin Spot ETF being approved in 2022, mainly because the market is now large and mature enough to support one.
There are plenty of other bitcoin ETF applications already waiting in the wings to be approved, the most significant of which is Grayscale Investments’ offer to convert into a spot ETF its own bitcoin trust – which just so happens to be the world’s biggest bitcoin fund. Yes, the flipping hasn’t happened yet, but bitcoin’s share of the market has certainly waned, with other digital currencies like ethereum playing a much larger role.
This is something analysts expect to continue into next year, as investors look more toward smaller pockets of crypto in the hope of big gains. Analysts flag ethereum, solana, polkadot, and cardano as coins to watch in 2022. They expect bitcoin’s market cap to be half the combined cap of smart contract coins like ethereum and solana, or even less. This would come as a result of retail investors beginning to realize the dangers of trading bitcoin, especially on unregulated venues, eventually switching over to other coins belonging to blockchains which actually serve an essential and fundamental role in decentralized finance. Decentralized finance and DAOs seem likely to be the highest growth areas of crypto, as Defi aims to recreate traditional financial products without middlemen, while DAOs can form strong communities on Web 3.0. Regulators flexed their muscles on cryptocurrencies this year, with China completely banning all crypto-related activities and U.S. authorities cracking down on certain aspects of the market. Analysts widely expect regulation to be a key issue in 2022 as well. For starters, a consensus is yet to be achieved on the legal “gray zone” of cryptocurrencies other than bitcoin and ethereum, which are not considered securities.
Experts say another key area regulators will likely focus on next year is stable coins – tokens whose value is tied to the price of existing assets like the U.S. dollar. Tether, the world’s biggest stable coin, is particularly controversial, as there are concerns about whether it holds enough assets in its reserves to hold its peg to the dollar. Regulators are likely to pry more in this area to study the soundness of the underlying collateral and the amount of leverage deployed. The Defi space might also come into further scrutiny, with many worried about services marketing themselves as “decentralized” when that may not be the case.
What do You think 2022 has in store for crypto? Will it end up deflating anticlimactically, or blow up like never before? Either way, if you liked the video, please do drop alike, and remember to subscribe to the channel & keep mining crypto knowledge – its price only seems to keep going up!