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Crypto: What can investors expect in 2022?

The key aspects to watch out for in the crypto realm are prices, business adoption, new investment products, regulation and central bank competition, all of which could get a boost next year.

December 29, 2021 / 01:33 PM IST
Cryptocurrency | PC-Shutterstock

Cryptocurrency | PC-Shutterstock

If 2021 was a landmark year for crypto investors who have seen phenomenal gains across most major crypto assets, including the emergence of non-fungible tokens (NFTs) as a booming investment avenue, all eyes are now on what 2022 could hold in this space, considering the widespread proliferation of the underlying blockchain technology.

There are key aspects to watch out for in this ever-expanding market, which can be expected to exert considerable influence on prices, business adoption, new investment products, regulation, environmental progress, and central bank competition.

Blockchain has emerged as a highly influential technology over the past few years because of the efficiencies it has been able to unlock for many industries. This technology, which is not restricted to the financial sector, underpins all crypto assets and is now being adopted in gaming, arts and entertainment, and internal accounting, a trend that’s expected to continue in 2022.

Dominic Ryder, CEO of vEmpire, a platform that advocates decentralisation of cryptocurrency, says he expects to see sector divergence, which is common in the stock markets but not yet seen in cryptocurrencies.

“The most likely route to first see this will be within the metaverse (a virtual reality space), gaming and NFTs,” Ryder said. “I also believe we will begin to see a larger push for and enhancement of DAOs (decentralised autonomous organisations). This can be both from new protocols entering but also existing protocols enhancing their proposition to allow for more user engagement.”

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Yield farming

Considering that most crypto applications are still in the nascent stage of adoption, the quantum of investment products based on them is likely to expand rapidly in 2022 with more takers for products such as yield farming, NFTs, and staking.

Yield farming is a process that allows cryptocurrency holders to lend their holdings to earn rewards. Staking refers to the holding of cryptocurrency funds in a wallet to support the functionality of a blockchain system and get rewarded in return.

Additionally, as more companies warm up to the idea of accepting cryptocurrencies as legal tender, crypto investors will be able to cash in on their holdings and even access traditional financial products like exchange-traded funds and collateral-based borrowing in lieu of their crypto assets.

Dileep Seinberg, founder of Thinkchain, a crypto, NFT and blockchain consulting company, said the next year will be bright for the crypto space and new investments will be seen in various sectors.

“There will be substantial growth seen in metaverse, a high level of NFT adoption across industries, government regulations for global payment adoption in crypto, and DAO will be a new addition to the space as business around DAO will be moving forward this year,” he said.

Also Read: A deep dive into how cryptocurrencies are being regulated across the world

He added that alternative blockchains apart from Ethereum will be highlighted as more use-cases will be built around it.

Despite calls for blanket bans on private cryptocurrencies in key markets such as India and China, countries including El Salvador are adopting a rather accommodative stance towards crypto assets, which bodes well and could serve as a catalyst for the next bull run in the most popular cryptocurrencies.

If major economies like China were to change their stance or even go all out and welcome crypto assets as a legitimate asset class, large swathes of funds and new investors could rush in to lap up cryptocurrencies, taking prices to stratospheric levels.

Grigory Rybalchenko, founder of Emiswap, a community-governed decentralised exchange, says the year 2022 will bring much to the Web3 industry in GameFi (the financialisation of video gaming), DeFi (decentralised finance), NFTs, and metaverses and a lot more people will start to trust the blockchain, which means that its mainstream use will become even more acceptable.

Digital currencies

“Institutional and private interest in crypto will keep rising. Most of the top financial institutions will likely start using crypto next year. Cryptocurrency will become more popular in online groups. The ever-changing DeFi movement is a protest against the centralisation of money,” Rybalchenko said.

Economies globally have largely accepted the benefits of blockchain technology and have started the process of launching sovereign crypto-tokens called central bank digital currencies (CBDC). The key difference between these digital currencies and private cryptocurrencies is that CBDCs will be regulated by the issuing central banks.

Although this contradicts the very premise of cryptocurrencies, CBDCs are likely to be a success among a larger investor base that has until now only considered investing in traditional financial products, leading to the entire space of cryptocurrencies and other crypto assets witnessing an exponential increase in investor interest and attracting private equity that will lead to further price appreciation.
Murtuza Merchant is a senior journalist and an avid follower of blockchain and cryptocurrencies.
first published: Dec 29, 2021 01:33 pm
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