‘Not simply bitcoin and ether’: Crypto business braces for wider adoption, extra competitors and maybe regulatory readability in 2022

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A wider adoption of crypto-related technologies could drive further growth in 2022, while competition also increases between different blockchains and sectors, industry participants said.

The past year has proven that crypto is “not just a fad,” said Devin Ryan, director of financial technology research at investment bank JMP Securities. “This is a market where there has been a significant build-up of network effects. And there’s a very strong self-interest in continued success, ”said Ryan.

In 2021, El Salvador began accepting Bitcoin BTCUSD, +1.07%, as legal tender. More and more companies like Pay Pal and AMC AMC, -0.56% started accepting some cryptocurrencies as payments. Amazon AMZN, + 0.02%,
Walmart WMT, -0.22%,
Loyalty and Visa V, -0.61%,
have hired, among other things, for crypto-related roles.

Total crypto market cap topped $ 3 trillion for the first time in November, before dropping to $ 2.39 trillion on Tuesday, according to CoinGecko.

Meanwhile, the companies that support the crypto economy are also worth $ 500 billion or more, according to Ryan. “These are the infrastructure companies and the stock exchanges and all the other plumbing and hoes and shovels in the industry.”

Loukas Lagoudis, executive director of crypto hedge fund ARK36, wrote in an email that in 2022 the company expects more “Investors will see allocation to digital assets as part of their risk management strategy, especially given the increasingly inflationary economic environment and falling bond yields” . . “

Partly due to Bitcoin’s volatility, “many banks and hedge funds will still have significant interest in trading these cryptocurrencies,” Christopher Vecchio, chief currency strategist at the forex data platform DailyFX, told MarketWatch. “There is an opportunity here to open markets.”

More crypto-intensive companies are expected to go public in 2022, + 4.08%, according to a report by investment manager VanEck XBTF.
“There are a variety of companies that crypto companies can participate in – from exchanges to digital asset miners to payment companies,” the report said. “As the crypto market continues to grow and develop, we assume that the market will grow with new listings and will also change as companies gain and lose market share.”

More than Bitcoin and Ether

As the crypto industry matures, some analysts expect more funds to flow into cryptocurrencies other than Bitcoin and Ether ETHUSD, -0.48%.

“In 2022, people will begin to understand the power of crypto and blockchain technology,” said Diogo Monica, president and co-founder of Anchorage Digital, the first state crypto bank. “It’s no longer just a speculative investment in Bitcoin or Ethereum; We’re talking about NFTs (non-fungible tokens), DeFi (decentralized finance), remittances, capital preservation and many other verticals, ”said Monica.

Some analysts expect Bitcoin dominance, which measures Bitcoin’s share of the overall crypto market, to decline further. According to the charting platform TradingView, Bitcoin is currently 41% dominant, compared to 67% at the beginning of the year.

“It’s unlikely that we’ll ever see BTC dominance over 60% again,” Jason Desimone, head of blockchain at the crypto-focused software company Ubik Group, told MarketWatch in an interview. “Bitcoin, ether, are always safe bets, but I don’t think they have the greatest advantage just because much of their value has already been realized,” Desimone said.

Thanks to the high gas fees from Etheruem, or of the computational overhead required to perform operations, Desimone said some other blockchains, such as Solana SOLUSD, + 2.15% and Avalanche, could see more benefits in 2022 as competition increased. Ethereum is transitioning from a proof-of-work to a proof-of-stake validation methodology, which is expected to lower the network’s gas fees when closed.

“I think the new trend in 2022 will be what is called interoperability, which means you can migrate from one blockchain to another pretty seamlessly and quickly,” said Desimone. “We will see a new ecosystem with lots of undervalued tokens that are rising sharply.”

The crypto industry saw the development of more vertical sectors in 2021, and analysts expect the trend to continue. Last year, DeFi saw explosive growth as DeFi’s total value rose more than 270% to $ 98.7 billion since early 2021, according to data provider DeFi Pulse.

NFTs attracted unprecedented attention as the transaction volume of the largest NFT marketplace, OpenSea, rose from $ 20,650 at the beginning of the year to around $ 51 million, according to data site DappRadar.

The Dogecoin DOGEUSD meme coin, + 5.24%, has traded around 3.169% so far in 2021, while another dog-themed token, Shiba Inu SHIBUSD, is up 0.03 by more than 41,000,000%. Metaverse-related tokens prices rose +1.45% thanks to the Meta FB boost,
or earlier Facebook. Blockchain gaming, represented by Axie Infinity and The Sandbox, also gained in importance.

Regulatory clarity?

In 2021, US regulators made several forays into new crypto rules.

The US Securities and Exchange Commission has given several Bitcoin futures-based ETFs the green light. President Joe Biden signed a $ 1 trillion infrastructure bill, which includes a provision requiring digital asset brokers to record transactions and report them to the Internal Revenue Service starting in 2023. The president’s working group urged Congress to swiftly pass new laws requiring stablecoins to be issued by insured banks that are overseen by federal banking regulators.

However, uncertainties still remain as the market ponders whether crypto loan products are securities, like stablecoins and decentralized finance should be regulated, and whether the SEC will soon approve a spot Bitcoin ETF.

“The voices calling for crypto regulation, be it for stricter consumer protection or just for the clarity of the rules for institutions, are getting much louder,” said Huong Hauduc, General Counsel at Digital Asset Prime Brokerage and Exchange BEQUANT, in one Email to MarketWatch.

Some analysts are certain that US regulators will provide more clarity in the coming year. “It was very nice to see a generally thoughtful and careful approach to regulation and a very good commitment from federal regulators to the industry,” said Nathan McCauley, co-founder and CEO of Anchorage Digital, told MarketWatch.

However, some remain bearish. “I don’t see the regulators slacking off in this regard. I think it will be a few more years before there is a clear position on this [crypto regulation]”Said Desimone from Ubik Group. “I think what will happen is unfortunately the brightest talent and most of the capital will flow into the (more) crypto-friendly jurisdictions.”

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