January 27, 2022 3:28 pm in Crypto

What To Expect With Cryptocurrency In 2022

Cryptocurrency has shot up in the market, but 2021 has been the most significant year for the industry. There was a lot of growth, one of the most major ones being an increase in token prices.

Some of the cryptocurrencies’ prices went up by thousands of percentage points. That indicates that there are still possibilities for epic crypto gains in the future.

Another way cryptocurrency grew in 2021 was through adoptions, innovations, and integrations, for example, major brands embracing NFTs and El Salvador’s Bitcoin policy.

In 2021, Bitcoin hit several all-time high prices and major drops. The second-largest cryptocurrency, Ethereum, also hit its all-time high prices.

The cryptocurrency trading and investment went up after the Covid lockdown. That has driven the United States government to show interest in cryptocurrency and place new regulations.

While all these changes were record-breaking, the cryptocurrency industry is still young and is expected to undergo more changes and innovations.

It is hard to tell where the industry will be in the future, but experts have followed the recent trends and made certain predictions for cryptocurrency in 2022. Some of the predictions include:

Cryptocurrency Regulations

One of the main things that have made cryptocurrency grow as much as it has today is the fact that it is an unregulated industry. However, that may change in the coming years. Governments around the world have started showing interest in regulating the cryptocurrency industry, and experts predict that those conversations will continue in 2022.

Lawmakers are trying to establish guidelines and laws that will make cryptocurrency better and safer for investors, and less accessible to cybercriminals.

In September 2021, the Chinese government banned all cryptocurrency transactions in the country, deeming them illegal. However, in the United States, the regulations are not clear as some states allow crypto transactions while others don’t.

Jerome Powel, the Federal Reserve Chair, recently said that there are no intentions of banning cryptocurrency in the United States. Gary Gensler, the Security and Exchange Commission Chairman, added that investors are likely to suffer great losses if there are no strict regulations.

These comments align with the view of Biden’s administration that new regulations are necessary for the industry.

The new regulations mean that the IRS will have an easier time tracking cryptocurrency activities among US citizens and make it easier for investors to report virtual currencies when filing taxes. The regulations could also affect cryptocurrency prices.

Crypto EFT Approval

EFT has witnessed breakthroughs already, with the debut Bitcoin EFT making its first appearance in the New York Stock Exchange in October 2021. This presents investors with a new, more conventional way to make crypto investments.

With this Bitcoin EFT, investors can invest in cryptocurrency directly from conventional investment brokerages with which they already have accounts, like Vanguard and Fidelity.

Some investors, however, have said that the BITO ETF is not sufficient because it does not directly hold Bitcoin, even though they are linked. Instead, the EFT holds Bitcoin futures contracts.

Bitcoin futures follow the actual cryptocurrency trends, but experts have pointed out that it might not track Bitcoin’s prices directly. For now, experts advise investors to wait for an EFT that directly holds Bitcoin. EFT approval has been on the table for a few years, but BITO EFT was the first one to get approved.

Experts say it’s too early to predict the number of investors who will get in on BITO, even though it witnessed a lot of trading actions in its initial week. Generally, the more accessible crypto assets are within conventional investment products, the more investors will invest and influence the market.

Experts, however, warn that investing in EFT still has some risks since it is a volatile and speculative investment.

Broader Cryptocurrency Adoption

More countries and mainstream companies worldwide have started adopting cryptocurrencies. More countries are allowing transactions, while more companies are starting to accept payment or even invest in cryptocurrency.

AMC is one of the companies that announce it will accept Bitcoin payments from the end of 2021. Fintech companies such as PayPal have also joined in by allowing their clients to purchase from their platforms using Bitcoin.

Tesla is also a major player in the crypto industry, and even though it has not made a certain stand on accepting Bitcoin payments, it has billions of crypto assets.

Experts predict that in 2022, more countries will allow crypto transactions, and more companies will accept cryptocurrency payments.

They predict that bigger and global companies will continue the cryptocurrency adoption in the second half of the year, with some companies like Amazon and Walmart easing adoption.

Currently, paying using cryptocurrency does not make much sense to people. However, as more mainstream companies adopt, it will change how people view cryptocurrency and make it one of the acceptable forms of payment.

Bitcoin Mining Bans

Experts at Arcane Research say that people are likely to witness more Bitcoin mining bans in 2022, especially in countries with low energy supplies or weak grids. They continue to say that countries with energy-rich jurisdictions, on the other hand, will embrace the industry.

These restrictions are meant for the investor’s sake and to make the mining more distributed, which is better for the market.

One of the major upsides in that decision is that it might push countries with weak or less sustainable electric grids towards cleaner energy. That will potentially blunt some one-sided social, governance, and environmental criticism (ESG) that blew into the mainstream in 2021.

Token Decoupling Will Continue

Decoupling means that various cryptocurrencies in the market will no longer track Bitcoin’s prices. Instead, each cryptocurrency will witness returns depending on its value propositions.

Bitcoin is undoubtedly the biggest cryptocurrency in the market, and it makes sense that other cryptocurrencies track its prices. Over the years, that has been happening slowly, but in 2021, decoupling accelerated, with each crypto having independent values and returns.

In 2021, there was a huge gap between the highest and lowest cryptocurrency returns. Layer 0ne tokens like Terra (LUNA) and Salona (SOL) had returns of around 8,000%, while flawed or aging projects like internet computers and EOS witnessed a decrease of above 80%.

This shows that being in cryptocurrency is not enough, and just like any other investment, your returns depend on where you invest.

Eth2 Arrival

This is something that a lot of Ethereum investors have waited for. The merge of the existing PoW chain and the new PoS Beacon Chain will see Ethereum’s transaction proof-of-stake (PoS) take a huge step forward in 2022.

This means that there is a higher risk degree, and investors might not be able to see big advantages to the transaction until 2023, when the Eth2 sill start introducing sharding.

One of the most important things investors should note is that the PoS transaction will not affect Ethereum transaction fees until they implement sharding. Over the past few years, high transaction fees have been responsible for making other layer-1 blockchains such as Avalanche popular.

Therefore, the Ethereum upgrade is not expected to cause any disruptions to the momentum.

Flattening Of The Overall Token Market

In 2021, there was a significant increase in the cryptocurrency market, with more people showing interest and investing. However, experts predict that in 2022, the market will flatten, but not as massive as the 2018 drawdown.

Experts say that by the end of the year, Bitcoin may set a new all-time high price above $69,000. However, it will be hard to maintain that and make it sustainable till 2023.

There is also a prediction that the stocks will experience a much slower growth compared to last year. According to Goldman Sachs, there might only be a 9% increase in the S&P 500 index, as compared to a 27% increase last year.

Bitcoin Price Volatility Continues

Bitcoin is the largest and most stable cryptocurrency in the market, and it is a perfect indicator of the general cryptocurrency market since the other cryptocurrencies follow its trends.

In 2021, Bitcoin prices witnessed a wild ride, hitting an all-time high in November. In April and October, it also had high prices of $60,000, but there was a huge drop in July, with the prices going to below $30,000.

This price volatility is one of the major reasons that experts advise investors to keep their cryptocurrency investments to below 5% of their portfolio at the beginning.

While it’s hard to tell how high the Bitcoin prices will get in 2022, experts say it is only a matter of time until it hits $100,000 in the future. That is according to the clues provided by Bitcoin’s past behavior.

Experts advise investors who invest in Bitcoin for the long-term not to worry about any short-time spikes. They advise them to play a steady long game without making any emotional reactions because that could cause investors greater losses.

Experts could speculate on what investors should expect in the coming years in the cryptocurrency market, but since it is a young and speculative market, it is hard to make exact predictions.

Therefore, regardless of all the speculations, investors advise investors to invest only what they are ready to lose and invest more in traditional investment options if they want to build wealth for the long term.