For crypto enthusiasts, 2021 has been a pretty good year. Since January, Bitcoin has gained almost 70%, and the entire cryptocurrency market now stands at more than 2 trillion US dollars. We have also achieved important milestones. In addition to Coinbase’s IPO, significant banks have begun to adopt the cryptocurrency, as well as the approval of the first Bitcoin ETF.
In 2022, the use of crypto and blockchain in different domains, from gaming to healthcare, is expected to continue growing. Such solutions have already been implemented by healthcare providers, logistics companies, music sharing platforms, and other types of business. At the same time, regulatory scrutiny has intensified, and price fluctuations are causing concern.
Top 10 Most Likely Developments
Below are the top 10 most likely developments that can occur in 2022.
1. Crypto Crash or Correction?
Despite the positive annual dynamics, not everyone in the expert community is optimistic, and some pundits are voicing serious concerns. But what could affect Bitcoin deposits and withdrawals in the near future?
In November 2021, the price for one BTC skyrocketed to around $69,000. Then, it quickly rolled back to under $50,000, losing over 30%. According to the conventional wisdom of Wall Street, a fall of at least 20% indicates that the market has become bearish. Yet, the pioneering cryptocurrency is famous for its volatility, so is this logic applicable?
Some negative predictions are based on the notion that Bitcoin is not a serious investment asset, as it does not have fundamental value. For example, Carol Alexander, professor of finance at Sussex University, believes that Bitcoin could reach a low of $10,000. If this prediction comes true, all of the gains made since 2020 will evaporate.
A similar collapse has already happened once. In 2018, Bitcoin plunged from almost $20,000 to $3,000. However, the growing institutional adoption may prevent the nosedive. More and more companies are jumping into the market.
Todd Lowenstein, the chief equity strategist of Union Bank’s private banking arm, supports the dim view of the future. He has told CNBC that the BTC price chart is reminiscent of historical asset bubbles, and these were also thought to be too special to follow the conventional market logic.
Finally, if the Federal Reserve takes a hawkish view and curbs inflation, Bitcoin and promotions for crypto enthusiasts will lose some of their appeals. Quantitative tapering is the biggest risk factor, and however, if it has probably been priced in, the crypto party may continue.
2. First Spot Bitcoin ETF
Crypto enthusiasts in the United States are eagerly awaiting the approval of the first BTC ETF based on spot prices. Currently, the ProShares ETF lets investors profit without direct exposure to the cryptocurrency, as it is linked to BTC futures contracts. These financial derivatives oblige an investor to purchase or sell Bitcoins later for a fixed price.
The biggest disadvantage of these ETFs is that rolling the contracts over is relatively expensive (5-10%). Now, the crypto market is bigger than ever and mature enough for an ETF linked to spot prices. The world’s largest Bitcoin fund — Grayscale Investments’ bitcoin trust — may become a spot ETF in 2022. Some other institutions have also submitted their applications.
3. More Emphasis on ‘DeFi’
While Bitcoin is still prevalent in the market, its share has shrunk due to the growth of strong altcoins like Ethereum. Experts project further growth of Solana, Polkadot, and Cardano in 2022. Coins that represent blockchain systems attract investors who are tired of Bitcoin’s erratic behavior. As smart contract assets play a fundamental role in decentralized finance, DeFi systems will show robust growth.
The market capitalization of Bitcoin in 2022 could be half of what all smart contract coins are worth. Meanwhile, DeFi systems and organizations could become the key growth areas of crypto worldwide. By the end of 2021, total investments in these services had already exceeded $200 billion.
The growth of DeFi is part of a bigger tech trend — Web3. This movement aims to create a novel decentralized version of the internet, which will include blockchain and crypto technologies like NFTs. However, the idea has a few high-profile skeptics, including Elon Musk and Jack Dorsey.
4. More Regulatory Changes
In 2021, authorities in many countries introduced new measures to regulate the circulation of crypto. For example, China completely prohibited all activities related to cryptocurrencies, and meanwhile, the United States government cracked down on certain market aspects.
In 2020, we were likely to see more important developments on the regulatory front, as the interest is higher than ever. According to Vijay Ayyar, VP of corporate development and global expansion at Luno, they will also concern altcoins other than Ethereum. The Securities and Exchange Commission has already decided that neither Bitcoin or Ether are securities. Soon, other cryptocurrencies may also leave the “gray zone”.
In 2022, we will also see the result of the lawsuit filed by the SEC against Ripple Labs. The regulator alleges that XRP must be regarded as unregistered security and that the blockchain company illegally sold tokens worth over 1.3 billion US dollars.
Regulators are expected to pay close attention to stablecoins — cryptocurrencies linked to existing fiat like the US dollar. The biggest coin of this type is Tether. However, it is relatively controversial, as some experts doubt whether its reserves justify the pegging to the dollar. The amount of collateral and leverage is going to be in the spotlight. However, even the number of online casinos accepting stablecoins is growing.
Finally, regulators are going to continue scrutinizing DeFi. The Bank for International Settlements, an umbrella group of central banks, called for the regulation of the sphere. It alleges that some services that market themselves as decentralized do not meet the criteria for DeFi.
5. Expansion of Crypto in Gambling
Bitcoin is already being used in the online gambling industry, as more and more websites are offering Bitcoin payments and even bonuses. In 2022, experts predict further expansion due to the key advantages of switching to crypto payments, such as guaranteed anonymity, enhanced security, and lower processing costs for the operators and users.
Gamblers do not share any personal information to make a deposit or request a withdrawal, and all they need is their wallet address. Blockchain guarantees security and speed, there are no delays due to transaction approval by third parties, and account verification is streamlined. Finally, high rollers appreciate the absence of deposit and withdrawal restrictions.
For casinos, the biggest advantages are lower costs and appeal to crypto supporters. In 2022, BTC transactions will be accepted by more gambling websites, including more casinos with high jackpots. However, if Bitcoin regulations with gambling change, the new legal landscape may become less favorable for the operators.
6. New Generations of Blockchain Solutions
Novel types of blockchain solutions are expected to enhance speed and scalability. Aion, Cardano, EOS, and other third-generation platforms have introduced solutions to scalability issues, such as sharding (database partitioning) and matured blockchain’s distributed application capabilities.
Fourth-generation blockchain platforms, such as Insolar and Aergo, also resolve trust challenges and accelerate the formation and operation of business networks. Easier onboarding, lower costs, and higher scalability facilitate variable consensus mechanisms and other pragmatic trade-offs. Their business-oriented interfaces make blockchain-based networks easier to use.
7. Increased Standardization and Interoperability
One of the most prominent emerging trends is cross-chain technology. It could become the ultimate solution for the interoperability challenge. The purpose is to transmit value and data between different blockchain networks. Polkadot is still the king of the cross-chain, and its success highlights the potential for interoperability systems like multi-chain application environments.
As of today, there are over 6,000 different cryptocurrencies in circulation. All of these blockchains exist as independent dots in a pattern. Interoperability is one of the biggest challenges for the crypto market. In 2022, experts predict the emergence of new standards and possibilities in this realm.
In the near future, multiple blockchains will be able to communicate, forming collective ecosystems with unified needs. Standardization is an important condition for the success of any technology, and Interoperability will boost trust and user-friendliness, and it is a path to mass adoption.
8. Blockchain-as-a-service (BaaS)
These solutions allow companies to use cloud-based systems for building, hosting, and using proprietary blockchain apps, smart contracts, and functions on a vendor’s infrastructure. The demand for BaaS is growing steadily, and it is expected to continue rising throughout 2022. Some of the biggest players in this space are Amazon, Microsoft, and R3.
BaaS allows companies to circumvent technical difficulties and operational overheads; they do not need to invest in sophisticated infrastructure to expand their capabilities. BaaS lets businesses concentrate on their core activities and still benefit from innovation.
9. Crypto Skills in Demand
According to a LinkedIn report, blockchain was one of the most in-demand skills in 2021. The projected growth of crypto-related tech in 2022 will lead to a further increase in demand for highly qualified professionals with cross-sector skills, such as experience with crypto and immersive live casino. Enterprises will be looking for candidates to improve cost efficiency and performance, while the development of the market, in general, will translate into more active headhunting for blockchain professionals.
10. Blockchain and the Metaverse
Blockchain is expected to become one of the elements of Metaverse, the emerging universe of the tech giant formerly known as Facebook. It will be filled with immersive technologies and experiences, including augmented and virtual reality. The blockchain aspect will allow Metaverse to store data in a decentralized fashion.
This means that blockchain could potentially underlie a wave of enhanced social media networks. In 2022, it is expected to be part of several platforms with crypto and NFTs in the Metaverse. While the former will define ownership, coins will power the new virtual economy. What’s more, Twitter is also considering the integration of crypto to streamline tipping for content creation. Applications for different forms of entertainment are promising.