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Dec 20, 2021

What is in store for Cryptocurrencies in 2022

With a groundbreaking year in 2021, what do we expect in 2022?

What's on the horizon for cryptocurrencies in 2022 after a record-breaking year?

Several notable advancements in cryptocurrency occurred in 2021.

For one thing, new crypto applications such as non-fungible tokens (NFTs) gained traction, with sales of these digital assets breaking records at prominent auction houses. Second, Bitcoin has made inroads into general acceptance, with big websites such as Expedia and Microsoft adopting the coin as a form of payment. Third, El Salvador became the world's first country to adopt bitcoin as legal cash in September.

There are numerous other examples of how the cryptocurrency business has grown in the last year. With this surge in activity, what does the future hold for cryptocurrencies in 2022?

We predict that cryptocurrencies will gain traction in three areas over the coming year: more adoption of Bitcoin as a payment method, higher regulatory scrutiny, and an increase in NFT activity.

​​Bitcoin's acceptance

Researchers have struggled to understand what motivates people to use Bitcoin. According to a recent study, five major characteristics influence someone's likelihood of utilizing Bitcoin:

  • Have faith in the system.

  • Word of mouth on the internet

  • The quality of the transactional web platforms offered

  • The investment's perceived riskiness

  • Bitcoin's performance expectations

Other research have given subtlety to this thesis by emphasizing the importance of gender, age, and educational level.

The current state of the cryptocurrency market makes it increasingly probable that Bitcoin will enter the mainstream in the near future.

First, there has been a rise in activity in online groups such as Twitter and Reddit, where even cryptocurrency newcomers may share information with seasoned investors to get word-of-mouth advice on price predictions and trading methods.

Second, there has been an explosion of new crypto-exchanges — or trading platforms where one may exchange fiat cash for crypto — as well as significant investments in existing exchanges' technological infrastructure. These infrastructure improvements have increased access to cryptocurrency markets and sparked the curiosity of institutional investors.

Institutional involvement and regulatory oversight

In the recent year, institutional institutions such as the European Investment Bank (EIB), the lending arm of the European Union, have taken a position on cryptocurrency.

The EIB launched a 100 million euro digital bond on the Ethereum blockchain in April. The offering also included Goldman Sachs, Banco Santander, and Société Générale. According to research, institutional acceptance is a tipping point for mainstream crypto adoption, and it appears we're on our way there.

Overall, the expanded availability of points of sale that take Bitcoin as a form of payment, as well as institutional investment in the field, will most certainly lead to broader adoption of Bitcoin as a form of payment in 2022.

Decentralized finance (DeFi) is commonly viewed as the next frontier in fintech after cryptocurrency. DeFi enables the development of decentralized systems that rely on distributed ledger technology to support peer-to-peer loans, establish new financial assets such as stablecoins, and even offer new corporate governance models.

Regulators appear to be paying more attention as well. The European Council — the body that dictates the European Union's political priorities — stated its view on the Markets in Crypto Assets (MiCA) framework in November, which will provide additional legal certainty over cryptoassets and DeFi.

In the same month, the Federal Reserve Board of Governors, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency of the United States issued a joint statement announcing the creation of a set of crypto policy directives.

Researchers have identified a lack of regulation as a fundamental impediment to widespread crypto adoption. Increased government control, combined with some countries' moves to examine digital versions of their national currencies, will almost certainly result in a lot more regulatory activity in 2022.

An increase in NFT activity

The year 2021 heralded a new wave of NFT sales. An NFT, for example, can provide proof of ownership of digital art in the same manner that a tangible canvas might provide proof of ownership of a Vincent Van Gogh painting.

Although NFTs were initially used to establish ownership of digital art, they have now been broadened to incorporate other types of digital property, such as digital real estate.

NFT sales are breaking new ground, with a recent Sotheby's auction collecting $17.1 million. As a result, the auction house established Metaverse, an NFT-only marketplace for the selling of digital works.

As new NFT applications develop, this market is expected to expand further in 2022.

Beware the buyer.

Regardless of these investing potential, we caution crypto investors to remain wary of statements they read in online groups. Before investing in cryptocurrency, crypto fans should do their homework.

New frauds and schemes are almost certain to arise in 2022. Consider the SquidGame cryptocurrency, which relied on the famous Netflix program but was a scam. Or the forgery of Banksy's NFT, which sold for 244,000 British pounds.

According to research on the behavior of retail investors, some are extremely vulnerable to the "fear of losing out."

As a result, it may be tough to refuse a tip from your hairdresser or your best friend's cousin on the next hot crypto opportunity. Crypto investors, on the other hand, should educate themselves on the technology as well as the fundamentals of financial markets if they wish to get engaged sensibly.

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