Cryptocurrency has undoubtedly changed how the world works and has only been around for about a decade. Everybody from your “everyday joe” to financial institutions is looking to see what it will do next and how they can capitalize on it. Let’s see what you should look out for and how you could potentially invest.
The top cryptocurrency trends consist of an intricate web of many facets that affect its price and its surrounding industries. These include widespread adoption, regulation, crypto ETFs, smart contracts, Defi, DApps, Web 3.0, Ethereum 2.0, green energy, and market volatility.
This article will dive deeply into the current and future trends for cryptocurrencies that you can currently see and also expect in 2022 and beyond. The facets that make up the cryptocurrency sector are vast, and no doubt you probably don’t know what half of them are. So keep reading to understand what you should look out for.
The widespread adoption of cryptocurrencies
Cryptocurrency has exploded into the global financial system over the past decade, and current research that has been done accounting for the number of crypto users worldwide will tally a staggering one billion by 2030 if the current trend of widespread crypto adoption continues.
This figure will equate to almost 12% of the world’s population using crypto as a form of currency, only 20 years since its inception.
Another study that was published by Bitget and Foresight Ventures and Boston Consulting Group (BCG) indicates that the number of people adopting crypto as a form of currency will significantly increase over the next several years.
One of the biggest stories of 2021 was El Salvador’s becoming the first nation-state to make Bitcoin legal tender. This shows that governments have seen the potential of crypto payments too.
By using Bitcoin for remittances, El Salvador claimed to be saving US$400 million a year in Western Union fees, and a parallel government in Myanmar adopted Tether as its official currency.
The Central African Republic also approved Bitcoin as its legal tender making it the continent’s first nation and the world’s second to do so. This makes it even more likely that other countries will follow suit and start adopting Bitcoin as their form of currency.
Additionally, these occurrences could begin a global shift in payments and remittances as more organizations realize that money can be exchanged instantly and inexpensively — as quickly as sending an email.
You also have major credit institutions looking into crypto and start testing it within their infrastructure and providing various services for it;
- Visa developed a crypto advice service
- Mastercard added support for cryptocurrencies
- WhatsApp started testing cryptocurrencies via the Novi wallet
Then traditionally, corporations and financial institutions have viewed cryptocurrency as a fad that will dissipate, viewing it with a large amount of scepticism. However, today most (if not all) financial institutions in the asset management industry are allocating a substantial amount of capital to this area.
Approximately $15 billion of institutional assets that were under management had been divided and allocated to cryptocurrencies by the end of 2020.
The adoption of cryptocurrency is so widespread and being adopted by so many people that these are now some of the cryptocurrency statistics for 2022;
- Bitcoin appears on social media every three seconds
- As of January 2021, confidence in cryptocurrency was nearly 100%
- More than 20,000 different cryptocurrencies exist
- There are more than 380 crypto exchanges
- 46 million Americans have invested in Bitcoin
- Bitcoin has a coin cap of 21 million
- Bitcoin rose in value by 66% between February 2021 and October 2021
- More than one million Ethereum transactions took place every day in 2020
- The top 10 cryptocurrencies make up 88% of the total market value
Cryptocurrency regulation
Cryptocurrencies are growing in the market due to their decentralized organization and lack of regulation. However, many investors believe cryptocurrencies are open to regulation as long as the rules are applied transparently.
Authorities worldwide are working hard to implement regulatory frameworks as former blockchain professor Gary Gensler leads the effort at the U.S. Securities and Exchange Commission (SEC).
Regulators in the U.S. are considering a “crypto sprint” to fast bring the industry into compliance, while on the other side of the Atlantic, the European Union (E.U.) is almost ready to enact its planned regulatory framework – Markets in Crypto Assets (MiCA).
The digital asset ecosystem will be more scrutinized because of this activity than ever before. However, regulating crypto will help prevent and deter cyber criminals. This is proposed in one section of the White House’s new framework on crypto regulation that Joe Biden intends to address.
It should be noted that these new regulations, if (and when) implemented, will change the landscape for current investors. The bipartisan infrastructure bill signed by the U.S. President in 2021 included crypto tax reporting provisions. This would make it much easier for the IRS to track crypto usage and activity amongst its U.S. citizens. The infrastructure bill was set to include $1.2 trillion in funding.
Crypto ETFs
BITO is the first SEC-approved bitcoin ETF that debuted on the New York Stock Exchange in 2021. This development and deployment of this crypto ETF was to establish a more conventional way to invest (trade) in crypto.
This means that investors can directly trade (buy and sell) cryptocurrency from standard financial brokerages. Moreover, investors can do this from finance accounts they already own, such as Vanguard or Fidelity.
Although experts say that the trend of crypto is followed suit by Bitcoin futures, it only tracks the price indirectly and not precisely. This means that potential investors and Bitcoin enthusiasts may want to wait for an ETF holding Bitcoin.
Thus the Securities Exchange Commission has discussed ETF approval of other cryptocurrencies before, but BITO is the first to land, and investors may not think that BITO is a risky investment; however, it is as risky as any other crypto investment.
Crypto and layer 2 smart contracts
If you don’t already know, “smart contracts” are computer protocols or programs that are used for automated transactions that run in response to another program when certain conditions are met. These smart contracts take place on a blockchain.
Bitcoin and Ethereum are now categorized in the “layer 1” of smart contracts. Essentially this layer offers a speed of between 5 and 7 transactions that can take place per second and are not scalable.
Layer 1 is designed to improve the blockchain architecture, while layer 2 is designed to help build and integrate third-party networks on top of it. Thus if cryptocurrency ever wants to achieve mainstream status in terms of widespread adoption, then the facilitation of indefinite scaling that can only be provided by layer 2 will have to become more popular. As such, layer 2 smart contracts are starting to gain a lot of traction.
Bitcoin price to remain volatile
Bitcoin is by far the most popular cryptocurrency in the world. In the cryptocurrency market, its price acts as a de facto standard. This means that all other cryptocurrencies tend to ebb and flow in conjunction with Bitcoin’s movement (price).
Throughout 2021, Bitcoin’s volatility remained constant. For example, it reached an all-time high of $60,000 in April before falling to $30,000 in July. Then, in November 2021, it reached a new peak price of $70,000 before declining to its current level of around $50,000.
Since the cryptocurrency industry is still in its early stages of development, experts anticipate this volatility to last through 2022 and beyond. Moreover, due to the volatile nature of Bitcoin and its impact on the financial sector, many experts say that it will most likely lose all of its gains and be completely wiped out, while others say it may even hit the $100,000 mark.
Additionally, it is the only explanation why many financial managers caution clients only to use 5% of their wallets for digital currencies. Investors must be ready for the market’s rise and fall.
Decentralized finance (DeFi)
Decentralized finance (more commonly known as DeFi) is an emerging financial technology based on secure and distributed ledgers, somewhat similar to those used in cryptocurrencies. Essentially, it offers assets (financial instruments) without the need for a “middle-man” (intermediary) such as brokerages, exchanges, or even banks.
In simpler terms, the entire concept revolves around traditional finance transactions that will occur on the blockchain and not in any other system that is run outside it. It also means you won’t need your typical financial institutions altogether, making them obsolete.
This is gaining an enormous amount of traction because DeFi is usually enabled by implementing smart contracts, and as discussed in the previous section, layer 2 smart contracts are growing rapidly in popularity.
The measurement of the total value of cryptocurrencies that are “all in” on smart DeFi contracts is known as Total Value Locked (TVL). The TVL soared from $2 billion to $15 billion in 2020 alone, according to DeFi Pulse. In 2021 the TVL growth was so exponential that it almost reached $100 billion.
Consider that one of the most popular DeFi applications regards what is known as yield farming. This process involved the lending of crypto assets to other platforms. The payment in return is interest or payment of other cryptocurrencies. This process is, in fact, very similar to digital banking, where a user will deposit money into an institution (platform) for an ROI in interest.
There is such a fuss revolving around yield farming due to the much higher rates that can be offered to depositors compared to the low-interest rates that “traditional” digital finance, or “normal” finance for that matter, has.
Decentralized Applications (DApps)
You also have DApps (or Decentralized applications). This is essentially some form of software (application) that runs on the blockchain or peer-to-peer network. These types of apps are becoming increasingly popular because they lay outside the control of a single authority. They are also typically built on the Ethereum platform.
In fact, DAppRaddar estimated that the total volume of Dapp transactions skyrocketed to $271 billion in 202, and additionally, it discovered and concluded that 45% of these DeFi DApps that were new ran on the Ethereum blockchain.
We said that DApps run on the Ethereum platform and typical software applications are not the only type of app or software that developers are utilizing to mine and utilize crypto. Gaming is another. Additionally, Ethereum, in this regard (in the industry of gaming), is not the only cryptocurrency that can be used.
For example, Solana (a younger and faster blockchain generation) offers the high performance needed for sophisticated blockchain-based gaming.
The first crypto game to become famous – is Axie Infinity.
Its play-to-earn mechanisms attracted nearly 2 million daily users, and investment poured into metaverse projects from all directions: Facebook and Microsoft staking their claim in an online virtual world.
This made cryptocurrency, NFTs, and other blockchain technologies the essential components of expanding the Metaverse. The core of this virtual world will be increased ownership of identity, utility, and access to the environment.
This will enable like-minded people to form communities where they can exchange experiences, construct alternative economies, and produce content.
Did you know? In his classic science fiction novel Snow Crash, Neal Stephenson coined the term “metaverse” for the first time.
Cryptocurrencies and Web 3.0
Web 3.0 is built around the idea of a new internet or rather a new version, which will incorporate ideas and concepts such as blockchain technology, decentralization, and even token-based economics.
This is something that individuals wishing to own or fund their websites that do not rely on large entities (like service providers) that own server farms and charge exorbitant amounts for fees will have to look into and keep in mind for 2023 and beyond.
Web 3.0 would essentially give people the ability to personalize the internet in a way that could never have been perceived before. Additionally, it would help with single-point failures of large systems. For example, if Facebook goes down nowadays, everybody in the world is affected, but with decentralized single-point failure systems, most users would not even know that it is down.
Moreover, many cryptocurrencies are linked to the new iteration of the internet, and these include cryptocurrencies like;
- Ethereum
- Helium
- Livepeer
This means that if Web 3.0 takes off, these currencies will blow up (in a good way).
Etherium 2.0
Serenity (Ethereum 2.0) was launched in December 2020. The roadmap for Serenity indicates that its upgrade will take place over large sections (specific chunks). Its transition from PoW (Proof of Work) to PoS (Proof of Stake) shows that Serenity has not yet reached its full potential and has enormous room for growth.
You can expect Serenity to go through various phases in 2020 that will include;
Lower energy consumption
with a switch to PoS, Ethereum will potentially maximize its network nodes’ computational resources. This will lead to lower energy consumption thanks to the new model validation process.
Deflationary Ether
The latest upgrading and the blending of EIP 1559 and PoS will affect the circulating supply of Ethereum. It will essentially drive it down. This may generate scarcity in the token, resulting in a hike in the token’s valuation.
Scalability
The hash power regarding the randomness will be replaced, and this will, in turn, keep the block size relatively low. The change will enable users (even ones that do not use optimal hardware) to run a validating node efficiently. Thus, more validators will effectively come onboarded. This will ultimately improve transactional speeds on the blockchain.
Cryptocurrency and green energy
Crypto miners have gotten the short end of the stick because mining for crypto in the U.S alone accounts for around 40 billion (yes, billion) pounds of carbon emissions. The farming of Bitcoin is estimated to generate almost 30 million metric tons of carbon emissions per year.
Due to this, many large-scale crypto-mining corporations are now implementing more eco-friendly consensus mechanisms to help with global emission reductions.
This has opened up a new field revolving around trying to determine ever more sustainable ways to drive down energy consumption in crypto mining by adopting whatever green energy solutions are possible. Investors should watch out for a company that can adopt or one that can provide such a solution because the ROI for getting in on this early could be game-changing because, like it or not, crypto is probably here to stay.
Conclusion
There are many trends to watch out for in 2022 regarding the impacts of cryptocurrencies on the financial markets and other sectors of global economics, including traditional business, finance, and more.
The space for growth in all sectors is so large that you will need to keep your ears to the ground to keep up-to-date. To conclude, even though there is a lot of speculation in the crypto market regarding all facets that it is involved in, the underlying trend for it seems to be positive, and investors may want to keep watch on a sector that pertains to their interests.
