What Will Happen With Crypto in 2022?
As we’ve established in our previous article, 2021 was a watershed year for blockchain and cryptocurrencies, due to the increase in price, recognition, and adoption around the world. It will be difficult for 2022 to achieve more in terms of price and recognition, but the technological advances of top cryptocurrencies may help the market continue on a bullish run.
In the cryptocurrency markets, there has been a distinct pattern over the past twelve years. There is a year or a year and a half of bullish momentum and the reaching of new all-time highs, then three or four years of a bear market, where coins drop in value over 50% and any coin that is not a sound investment dies. These bull runs happened in 2013, 2017, and now in 2021. If history is any indication, this pattern could signal a long bear market starting in 2022.
However, as with any investing pattern, as soon as it is noticed by the masses it no longer becomes relevant, as people try to invest based off of the pattern which renders it obsolete. Whether or not the crypto market has reached this point remains to be seen, but it is important to keep this pattern in mind during any sort of market selloff that may come in the near future.
If the cryptocurrency market experiences a downturn, it is likely that the NFT market will as well. During traditional market downturns, investors tend to sell out of risky and illiquid assets into safer and more secure assets. NFTs perfectly fit the definition of risky and illiquid, and thus are a prime target for a selloff in the event of a market crash.
Another concern for 2022 is the possibility of a regulatory crackdown. Throughout 2021, lead United States regulatory agencies like the SEC and FINRA have been discussing the regulation of cryptocurrencies and stablecoins. If done correctly, and in a way that does not prohibit innovation in the space, these regulations could be the ticket to mass adoption and use of cryptocurrencies, as they will make corporations feel more comfortable using and investing in digital assets. However, if they stifle the blockchain space and make investing and using cryptocurrencies a hassle, it could decimate the market in the medium-term. Though there is no clear indication about how the United States will choose to regulate, it is almost guaranteed that some sort of regulation will come about in 2022.
Even if the valuation of the cryptocurrency market decreases significantly, the progress and development of top projects will continue at its blisteringly fast pace, which will be positive for the market as a whole. For example, Ethereum’s “merge” event is slated to happen in Q1 or Q2 in 2022. When this happens, Ethereum will transfer from proof of work to proof of stake, which is more efficient, less energy consuming, and is the first step to increasing Ethereum’s transaction speed and decreasing its cost through shard chains. This upgrade will help Ethereum compete with other smart contract platforms like Avalanche and Cardano, and help it keep its title as the king of smart contract platforms.
Many other technological innovations will also happen over the next year. Polkadot’s parachains will go live, which will see dozens of blockchains have interoperability capabilities. Additionally, Ethereum Layer 2 solutions, like Optimism and Arbitrum, will see greater adoption as they finish their releases, which will help solve the Ethereum scalability issues. Moreover, the first decentralized applications on Cardano will go live. This will see decentralized exchanges like SundaeSwap and money markets like Meld launch, and Cardano will finally become a blockchain with a use case for the average person.
The adoption of cryptocurrencies, which occurred at a rapid pace in 2021, is expected to continue well into 2022. Like with any sort of new technology, the adoption of cryptocurrencies will only increase over time, until it is either proven to be a fad or used by billions of people and companies around the world. With marketing efforts from companies like Crypto.com and FTX, which will include commercials for the Super Bowl, cryptocurrencies will only become more prevalent in our everyday lives as time goes on.
Even though the potential for a crash next year may scare some investors, those who have been in the cryptocurrency space for more than four years know that continued development and adoption is the true metric of cryptocurrency success. As long as this continues, the fate of the cryptocurrency market will be very optimistic.
By Lincoln Murr