2021 was a spiraling chaotic year for the crypto currency sector, and many people are wondering what the future holds in 2022. Predictions about Crypto have come pouring in for 2022. While some are saying that this year will be incredible for crypto, others believe that dark times may be ahead.
Kraken intelligence released a report in 2021 about Crypto in review which revealed a constant uptrend with things such as adoption metrics. Another thing that was key was an enormous proliferation of new applications and services on smart contract platforms.
There has also been a tremendous growth on DeFi where you have billions of dollars locked in collateral. Trends for digital assets such as NFTs came about and people started to engage in digital art networks. Even if the pricing seems choppy and volatile, all underlying signals are continuing to trend positively.
Nations to Adopt Digital Currency (CDBC)
Experts predict that more countries will launch their central bank cryptocurrencies or CBDCs. This prediction pertains to retails CDBC which regular people will use. It will not concern the wholesale CDBCs that only select individuals will use. Only two countries so far have successfully launched retail CDBCs.
The first was the Bahamas, where the Sand dollar launched in October 2020, and the second is Nigeria, whose coin e-nira was launched in October 2021. According to the CDBC tracker, many companies including China, Ghana, Uruguay, and a handful of Caribbean islands are currently in the pilot phase of development.
Even though it is not certain whether these countries will complete their CDBC pilots by the end of 2022, China is set to launch their upcoming digital Yuan for 2022 by the end of their 2022 Winter Olympics. What all the countries have in common is that they are relatively small and partially dependant on the US dollar.
The record inflation which came with the dollar has only accelerated the development of central bank digital currency around the globe. This is largely due to countries seeking to get more control of their wealth. When compared to Fiat currency, CDBCs give central banks the power to both, create and destroy the currency circulation.
Theoretically, this power allows the central banks to keep hold of inflation in a much better way. However, this benefit comes with a trade off, which is that it gives the central bank control of everyone’s bank balance. This is something that people in the decentralized sector would deny for more reasons that you might imagine.
This also raises questions on the current inflation, and whether it is occurring so that governments can inflate away the value of physical fiat. This way more people will be willing to adopt the digital alternative. Many countries have started to partner with crypto projects so that they can develop their CDBC infrastructure.
The Metaverse Narrative to Continue Further
Along with the growth of NFTs (non-fungible tokens), games on the blockchain, and other crypto niches, the metaverse narrative will only grow stronger. In addition to the positive effects that these niches will have on crypto adoption, they will also drive the interest of many institutions. Many big brand companies are beginning to get into the NFT market.
The latest of this adoption is Adidas and its NFT collection briefly became one of the biggest due to its volume. Most of the companies that create NFT collections are in the food and beverage, and retail shopping sector. This comes as no surprise because both of the industries are facing challenges due to the supply chain shortages.
Selling NFTs do not require you to utilize the supply chain system, and you also do not need a physical location to display your virtual products. As technology begins to advance, you will note that line between physical and virtual will start to blur.
Another advantage of digitizing the retail market is that the overhead is much lower in the metaverse. All of these advantages are pushing the metaverse adoption, and Facebook’s rebrand is becoming a leader in the current metaverse movement.
People are immersing in multiplayer video games more often today, which only goes to show the potential for metaverse adoption. Co founder of Axie Infinity believes that the next generation of social media platforms will be indistinguishable from metaverse gaming platforms. He has been saying this since July 2021.
In other words, it is very likely that the next social media platform will be based on a blockchain game, and big companies in the gaming industry are willing to explore this niche as well. Adidas, Ubisoft, and Meta cannot move as quickly as crypto currency projects in these niches, and all of their crypto activities will be under scrutiny by regulators.
More Exchange Traded Products
You are likely to see more exchange traded products for cryptocurrencies that are approved in the US. These products will specifically pertain to an ethereum future ETF and a spot bitcoin ETF. When you pair that with the fact that there is a strong institutional demand for Ethereum and 100K of micro Eth future contracts traded in the first weeks adds to this claim.
Furthermore, SEC chairman Gary Gensler stated that they will gladly approve any crypto ETFs backed by regulated financial instruments like the CME futures. This is the SEC approved three Bitcoin futures ETFs in the last year.
When it comes to a spot Bitcoin ETF, the approval of such as instrument can entirely depend on the quality of the crypto custodian that is holding the physical Bitcoin which is being backed by the ETF. Naturally, the only institutions that qualify custody assets in the eyes of regulators are the big banks. This is why wisdomtree refilled its spot bitcoin ETF with a legacy bank shortly after it was rejected by the SEC.
As you can see, 2022 has the potential to bring more swings in the crypto space and investing. For investors that are looking to enter the space, it is best to follow the trends and know about the evolution of these dynamics. Many of the popular cryptocurrencies saw their values increase over this year. Overall, there is always something exciting happening in this space and it makes sense to be vigilant for new opportunities.