These trends may shape the cryptocurrency market in 2022
- The COVID-19 pandemic has been a boon for the cryptocurrency market.
- Investors constantly looking for innovations could exploit new opportunities in the field of cryptocurrencies.
- Some trends that may emerge in the crypto market in 2022 include the regulation of stablecoins, the launch of central bank digital currencies, and the rise of DeFi.
Over the past couple of years, cryptocurrencies have disrupted the existing financial ecosystem, sparking 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 take advantage of the surge in prices. The diverse world of NFTs, decentralized finance, and blockchain-backed securities has provided investors with exciting new businesses to choose from during the COVID-19 era.
While the world of crypto is still taking shape, investors are continually on the lookout for an innovation or a novel idea to invest in. One such example is the metaverse. Although the Metaverse was taken with trepidation by the market, it has grown in popularity in a short time.
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Many of these prospects await the cryptocurrency space, which can open new doors of opportunity for investors and traders. Here is a list of five important trends that may emerge in the crypto market in 2022.
Cryptocurrencies are highly volatile as an asset class as they witness massive price swings in a split second. To avoid dubious scams due to high price volatility, authorities are exploring the concept of autocratic regulation for the crypto world. In fact, cryptocurrency regulation is expected to be top of mind for several governments in 2022.
Within the cryptocurrency asset class, stablecoins are initially expected to be subject to regulation. Since stablecoins are usually pegged to a commodity or currency, they should be relatively stable and less prone to erratic price swings. Due to reduced price swings, governing bodies are more likely to prioritize stablecoins over other cryptocurrencies in the regulatory process.
Advances in technological intelligence have created an environment in which financial transactions can be carried out autonomously. One such prominent space is decentralized finance (DeFi), which forms the essence of blockchain operations like NFTs. Essentially, DeFi means algorithms underlying cryptocurrencies, which are consistent enough to track transaction records and avoid errors.
The decentralized finance market has only grown with the growing popularity of cryptocurrencies. Also, the large-scale applicability of cryptocurrencies has been well supported by decentralized finance.
Decentralized finance can take center stage in 2022, with robust growth. Specifically, the remaining momentum in the DeFi space from 2021 is expected to translate into a booming industry over the coming months.
Means of payment
The year 2021 has seen several companies adopt Bitcoin to facilitate payments on their online platforms. The new payment method has become a lucrative offering for crypto enthusiasts, attracting a larger proportion of the population to these companies.
The use of cryptos as a method of payment is expected to increase this year, even in the broader retail environment. However, the pace of growth will depend on whether people maintain their faith in digital currencies, given the recent stock market crashes in the cryptocurrency space.
Central bank digital currencies
The adoption of bitcoin as legal tender in El Salvador has cemented cryptocurrency’s position as an alternative to paper money, challenging existing notions of money. Given these developments, many governments are considering developing their own cryptocurrencies to attract the public to a safer alternative for their investments.
As cryptocurrencies are backed by powerful blockchain technology, they can offer governments a secure way to transact. Blockchain technology ensures that user privacy is maintained at all stages of the transaction. These advantages offer a compelling argument for the mass adoption of blockchain-backed currencies.
exchange traded funds
Exchange-traded funds or ETFs move in tandem with the market, allowing investors to create a balanced portfolio. It also allows investors to invest according to their risk appetite. Many new Bitcoin-related ETFs were launched in 2021 after passing a phase of great scrutiny and weakening.
Surprisingly, the crypto ETF space quickly became a big industry, in part because it offered a sense of security for those looking for stability in a relatively unstable space. Although crypto ETFs took a while to get approved, they were a boon for investors who were wary of using cryptocurrencies as a portfolio diversifier.
Cryptocurrencies have undoubtedly earned the reputation of an asset class that is more than just a fad. Although the crypto industry continues to see some hiccups in terms of price fluctuations and regulatory setbacks, the space is likely to remain in the spotlight for one reason or another. It will be interesting to see how well these discussed trends play out in 2022, defining a new year for cryptocurrencies.
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