There’s no denying that 2021 was the year that cryptocurrency went mainstream. Even with a couple of bad busts to counter the booms, Bitcoin gained acceptance as a financial asset rather than some far-out, libertarian fantasy money project. Non-fungible tokens (NFTs) are bringing blockchain technology into mainstream culture, attracting buyers not interested in financial cryptocurrency.
Here are 10 predictions for what 2022 holds for crypto.
Crypto goes mainstream:
Cryptocurrencies have surged so much that their total value has reached nearly $2.5 trillion, rivaling the world’s most valuable company, Apple, and have amassed more than 200 million users. At that size, it’s simply too big for the financial establishment to ignore.
Firms that cater to the world’s wealthiest families are increasingly putting some of their fortunes into crypto. Hedge funds are trading Bitcoin, which has big-name banks starting to offer them services around it. PayPal lets users buy crypto on its app, while Twitter helps people show appreciation for tweets by tipping their creators with Bitcoin.
Bitcoin may be in the doldrums price-wise at the moment, but it’s getting easier for average people to buy the biggest cryptocurrencies thanks to Square, PayPal, Venmo, Robinhood and other options that don’t require signing up for an exchange account or buying a cold wallet — or knowing what a cold wallet is — multiply.
Financial institutions and investment firms’ crypto and blockchain departments are on hiring sprees, and executives understand that they need to understand it. And government regulators worldwide are planning how to regulate crypto — at the retail and institutional level — rather than whether to kill it.
The digital dollar is coming: There’s already plenty of signs that countries around the world are getting more serious about central bank digital currencies, with Jamaica announcing the first-quarter rollout of a digital currency and Mexico aiming for a 2024 launch of a digital peso to start the new year.
Americans will have digital dollars accessible through smartphones within a few years. Paper money and checkbooks won’t go away completely but the overall benefits of digital money are compelling.
The SEC will get crypto authority: The U.S. Securities and Exchange Commission (SEC) will likely get the formal oversight authority of cryptocurrencies that Chairman Gary Gensler wants, instead of a new agency, but with its wings clipped.
Bitcoin-as-currency will fade: It may break Jack Dorsey’s heart, but bitcoin and all other non-stablecoin cryptocurrencies are simply too volatile to be used as a day-to-day currency anywhere the economy hasn’t completely collapsed — we’re looking at you, El Salvador and at you, Tesla. Between stablecoins and CBDCs, Bitcoin creator Satoshi Nakamoto will lose the payments battle, but his technology — blockchain — will start winning the war.
DeFi will be co-opted: We’re going to be crypto-skeptics here. Decentralized finance will show it has legs and will boom this year, but the legs will slowly be cut out from under it in two ways: First, regulation. This could be more of a multi-year process, but governments don’t like financial markets they can’t control. Second, financial institution (FI) middlemen will adopt the blockchain tools that give DeFi much of its advantage but with the benefit of centralized management. Either way, consumers will benefit for once.
NFTs will permeate the culture: Non-fungible tokens have too many potential uses in fields ranging from the arts to gaming to legal and financial areas like real estate and tokenization of assets. Besides, there are plenty of benefits for the people who would have to adopt them: Artists and musicians could build automated royalty into the resale of anything they produce, while real estate sellers will be able to vastly expand their buyer pools at all levels by fractionalizing property ownership via NFT tokenization.
Metaverses will show they have legs: The interactive nature of metaverses as a platform for social interaction, commerce, recreation, education, and politics will make them a bigger and bigger part of both the economy and the culture. They may be decentralized or not, but they are coming. That said, Facebook won’t rule the metaverse. It is too ungainly and too distrusted to move fast and break things anymore.