Summary
- The COVID-19 pandemic has been a
boon for the cryptocurrency market. - Investors
continuously on the lookout for innovation could tap fresh
opportunities in the cryptocurrency space. - Some
trends that can emerge in the crypto market in 2022 include
stablecoin regulation, the launch of central bank digital
currencies and the rise of DeFi.
Over the last
two years, cryptocurrencies have disrupted the existing
financial ecosystem, piquing the interest of even novice
investors. Indeed, the pandemic has been a boon for the
cryptocurrency market, with several new investors entering
the arena to tap the price boom. The diverse world of NFTs,
decentralised finance and blockchain-backed securities
provided investors exciting new ventures to choose from
during the COVID-19 era.
While the crypto world is
still shaping up, investors are continuously on the lookout
for an innovation or a never-before-seen idea that they can
invest in. One such example is the Metaverse. Although the
Metaverse has been taken apprehensively by the market, it
has seen booming popularity in a quick time.
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Many such prospects await the
cryptocurrency space, which can unlock fresh doors of
opportunities for investors and traders. Here is a list of
five important trends that can emerge in the crypto market
in 2022.
Stablecoin
regulation
Cryptocurrencies are highly volatile as an
asset class as they observe massive price fluctuations
within a fraction of seconds. To prevent dubious scams due
to high price volatility, authorities are exploring the
autocratic regulation concept for the crypto world. In fact,
cryptocurrency regulation is expected to be a focal point of
several governments in 2022.
Within the cryptocurrency
asset class, stablecoins are initially anticipated to be
subject to regulation. As stablecoins are typically pegged
to a commodity or a currency, they are expected to be
relatively stable and less prone to erratic price changes.
Owing to reduced price variations, governing bodies are more
likely to prioritise stablecoins over other cryptocurrencies
in the regulatory process.
Decentralised
finance
The advancements in technological
intelligence have created an environment where financial
transactions can be self-conducted. One such prominent space
is decentralised finance (DeFi), which forms the essence of
blockchain operations like NFTs. Essentially, DeFi means
algorithms underpinning cryptocurrencies, which are coherent
enough to keep track of transaction records and avoid
errors.
The market for decentralised finance has only
grown with the rising popularity of cryptocurrencies.
Besides, cryptocurrencies’ wide-scale applicability has
been well-supported by decentralised
finance.
Decentralised finance can take centre stage
in 2022, witnessing robust growth. More specifically, the
leftover momentum in the DeFi space from 2021 is likely to
translate into a booming industry over the coming
months.
Method of payment
The year 2021 saw
several corporations embracing Bitcoin to facilitate
payments on their online platforms. The new mode of payment
emerged as a lucrative offering for crypto enthusiasts,
drawing a larger proportion of the population towards such
businesses.
The usage of cryptos as a mode of payment
is expected to grow this year, even in a broader retailing
environment. However, the pace of growth will depend on the
retention of people’s trust in digital currencies, given
recent market crashes in the cryptocurrency
space.
Central bank digital currencies
The
adoption of Bitcoin as a legal tender in El Salvador has
cemented the cryptocurrency’s footing as an alternative to
paper money, challenging the existing notions of money.
Given these developments, many governments are considering
developing their own cryptocurrencies to draw the public
towards a safer alternative for their investments.
As
cryptocurrencies are backed by powerful blockchain
technology, they can offer governments a secure way to
conduct transactions. Blockchain technology ensures that the
users’ privacy is maintained at all stages of the
transaction. These advantages offer a compelling argument in
favour of the mass adoption of blockchain-backed
currencies.
Exchange-traded
funds
Exchange-traded funds or ETFs move in tandem
with the market, allowing the investors to create a balanced
portfolio. It further enables the investors to invest as per
their risk appetite. Many new Bitcoin-linked ETFs were
launched in 2021 after passing a phase of great scrutiny and
debilitation.
Surprisingly, the crypto ETF space
quickly grew into a large industry, partly because it
offered some sense of security to those seeking stability in
a relatively unsteady space. While crypto ETFs took some
time to get approved, they were a boon for investors
apprehensive about using cryptocurrencies as a portfolio
diversifier.
Cryptocurrencies have undoubtedly
formed the reputation of an asset class that is more than
just a fad. Although the crypto industry continues to
observe some hiccups in terms of price fluctuations and
regulatory setbacks, the space is expected to remain in the
limelight for one reason or another. It will be interesting
to see how well these discussed trends catch on in 2022,
defining a new year for cryptocurrencies.
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