2021 saw major market events for the crypto sector and the year ahead will see cryptocurrencies mature and truly enter mainstream.
The views and opinions expressed in this article are those of the author.
Blockchain and crypto assets have made tremendous strides in 2021 in virtually every way, so it makes sense to take a look back at the major accomplishments of the year, and to look ahead and see what 2022 might bring.
The current year did not necessarily get off to an amazing start for the global crypto asset space, as the rally that had carried crypto to all-time-highs in Q1 2021 cooled off significantly as the year continued to march on.
Following this cooling off period (which ironically occurred during the warmer summer months, at least in the northern hemisphere), the price rally returned, with fresh all-time highs being reached in Q4 2021 prior to some retracing as the year comes to a close.
Exciting as price volatility is, and it certainly can generate quite a bit of buzz, focusing exclusively on price action and charts can overshadow the many significant events that occurred during 2021.
Major market moving events in 2021
- The first Bitcoin exchange-traded-fund (ETF) was approved to start trading on US equity marketplaces, a major win for crypto advocates, and while it is linked to futures versus Bitcoin itself, this is a significant step forward toward mainstream adoption.
- China’s central bank digital currency (CBDC), having initially launched as a pilot during late 2020, continued to proliferate and was used by over 140 million domestic users during the year. While usage remains limited to domestic users at this point, the volume of transactions is worth noting.
- The crypto asset marketplace exceeded a market capitalisation of over $3 trillion (€2.66 trillion), an incredibly rapid rise considering the sector only came into existence in late 2008.
- Major payment processors, including Visa, Mastercard, Square, and PayPal introduced and/or expanded crypto payment options for individuals and institutions, including allowing Bitcoin denominated payments, all during 2021.
- Tesla made what, at the time, was the single largest purchase of Bitcoin by a US publicly traded entity, totalling $1.5 billion (€1.33 billion), sending shockwaves through public markets and attracting the attention of regulators the world over.
- Financial institutions, from BNY Mellon to JP Morgan to Morgan Stanley, to virtually every major financial institution in the world began offering crypto services to both individual and institutional clients.
Put another way, it is clear that 2021 was a year or broader individual and institutional adoption, with the pros and cons that such massive adoption would result in going forward.
Regulation and regulatory attention have been increasing in parallel to the rate of adoption of blockchain and crypto assets.
Depending on the perspective of the individual or firm in question, the attention can either be viewed as a positive or negative development, but regardless this attention is certainly going to be a driving force moving forward.
As the calendar flips to 2022 it is worth taking a look ahead and see just what some of the trends and events might be as regulation and adoption accelerate across the globe.
This upcoming year just might be the year that crypto – from policy to various applications – will truly mature and enter mainstream utilisation.
What 2022 will hold for the industry
Central banks will take an increasingly leadership oriented role in crypto asset development, whether or not Bitcoin maximalists are in agreement with this development or not.
The rise of central bank digital currencies (CBDCs) has caused shockwaves in the crypto asset community as, during 2020 and 2021, the investment and attention paid to the possibility has rapidly increased.
The potential for improvements in payments is significant, but must be balanced against the risk of governmental creep and surveillance possibilities.
NFTs will mature
Non-fungible tokens (NFTs) have made their collective presence felt in the general crypto asset marketplace, bursting into the mainstream conversation following the March 2021 Beeple auction, at an eye-watering $69 million (€61.25 million).
As the year has progressed there have been innumerable athletes, entertainers and organisations that have entered into this space.
Even the concept of the metaverse, an idea that manifested in Q4 2021, is dependent on NFTs and the tokenisation of ownership that can connect the physical and digital worlds.
Stablecoins will become mainstream
Crypto currencies might have been discussed and talked about – at this point – for over a decade, but that does not mean it is correct to generalise the sector.
Specifically, stablecoins have quickly emerged as a tool to help enable mainstream utilisation of crypto payments, have been adopted by payment processors and financial institutions the world over, and even play a critical function in the decentralised finance (DeFi) space.
Featured prominently in the recent President’s Working Group report, highlighting the 500 per cent increase in utilisation from October 2020 to October 2021, stablecoins will undoubtedly continue to rise in prominence and adoption in 2022.
Bitcoin will hit $100,000 during 2022
Price predictions, especially as they connect to Bitcoin and other crypto assets, are notoriously difficult to get right, but it is always worth giving it a shot.
Targets in excess of $100,000 (€88,760) are relatively common in the current conversation, but are normally projected to be at least several years away.
Especially given the recent volatility in price such a target might seem like a bit of a reach, but the trend toward wider adoption and integration bolsters this prediction.
This past year was a dynamic and fast moving one for the blockchain and crypto asset sector, but that does not mean that the future will be any less creative and innovative.
Even though much ambiguity and uncertainty remains in terms of how individual and institutional adoption, the underlying trend is clear.
Blockchain and crypto assets – of all kinds and iterations – will continue to proliferate, become integrated within business operations, and mature as the calendar flips to 2022.
No matter what specific trend or application comes to the surface, the future of the space looks bright indeed.
- Dr Sean Smith is a strategic advisor at The Central Bank Digital Currency Think Tank and a regular contributor to Euronews Next