Broader adoption of crypto related technology could drive further growth in 2022, while competition is also increasing among different blockchains and sectors, industry participants said.
The past year has proved that crypto is “not just a fad,” said Devin Ryan, director of financial technology research at investment bank JMP Securities. “This is a market where there’s been significant network effects building. And there’s a very strong vested interest in the ongoing success,” Ryan said.
In 2021, El Salvador started accepting bitcoin as a legal tender. More companies such as Pay Pal and AMC started accepting some cryptocurrencies as payments . Amazon Walmart Fidelity and Visa among others, have been hiring for crypto-related roles.
In November, the total crypto market capitalization topped $3 trillion for the first time, before it fell to $2.39 trillion as of Tuesday, according to CoinGecko.
Meanwhile, the companies that are supporting the crypto economy also boast a value of $500 billion or more, according to Ryan. “This is the infrastructure companies and the exchanges and all the other plumbing and picks and shovels of the industry.”
Loukas Lagoudis, executive director at crypto hedge fund ARK36 wrote in an email that the firm expected in 2022 more “investors will see allocation to digital assets as a part of their risk management strategy, especially given the increasingly inflationary economic environment and the declining bond yields.”
Partly due to bitcoin’s volatility, “a lot of banks and hedge funds will still have significant interest in trading these cryptocurrencies,” Christopher Vecchio, senior currency strategist at Forex data platform DailyFX told MarketWatch. “There’s an opportunity to make markets here.”
More crypto-intensive businesses are expected to go public in 2022, according to a report by investment manager VanEck “There are a wide range of businesses that crypto companies can participate in – from exchanges to digital asset miners to payment companies,” the report wrote. “As the crypto market continues to grow and develop, we anticipate the market to grow with new listings, and also shift as companies win and lose market share.”
More than bitcoin and ether
As the crypto industry grows increasingly mature, some analysts expect more funds to flow into cryptocurrencies other than bitcoin and ether
“In 2022, people will begin to understand the vast scale of what’s possible with crypto and blockchain technology,” said Diogo Monica, president and co-founder of Anchorage Digital, the first federally chartered crypto bank. “It’s no longer just speculative investing in Bitcoin or Ethereum; we’re talking about NFTs (non-fungible tokens), DeFi (decentralized finance), remittances, capital preservation, and many other verticals,” Monica said.
Some analysts expect the bitcoin dominance, which measures bitcoin’s market share of the whole crypto market, to continue to decline. Bitcoin dominance currently stands at 41%, down from 67% at the start of the year, according to charting platform TradingView.
“It’s unlikely we will ever see BTC dominance above 60% again,” Jason Desimone, head of blockchain at crypto-focused software company Ubik Group, told MarketWatch in an interview. “Bitcoin, ether, are always safe bets, but I don’t think they have the most upside, just because a lot of their value has been realized already, ” Desimone said.
Thanks to Etheruem’s high gas fees, or the computational effort required to execute operations, Desimone said some other blockchains, such as Solana and Avalanche, could gain more advantages in 2022 as competition intensifies. Ethereum is transitioning from proof-of-work to a proof-of-stake validation method, which is expected to lower the network’s gas fees upon completion.
“I think the new trend in 2022 is going to be what’s called interoperability, which means where you can migrate from one blockchain to another pretty seamlessly, pretty quick,” Desimone said. “We’re going to see a new ecosystem with a lot of undervalued tokens rising a lot.”
The crypto industry has witnessed the development of more vertical sectors in 2021, and analysts expect the trend to continue. In the past year, DeFi, saw explosive growth, as the total value locked in DeFi rose more than 270% to $98.7 billion since the start of 2021, according to data provider DeFi Pulse.
NFTs attracted unprecedented attention, as the largest NFT marketplace OpenSea saw its transaction volume growing to around $51 million from $20,650 at the start of the year, according to data site DappRadar.
Meme coin Dogecoin traded up about 3,169% so far in 2021, while another dog-themed token Shiba Inu rose more than 41,000,000%. Prices of Metaverse-related tokens surged thanks to the boost by Meta or previously Facebook. Blockchain gaming, represented by Axie Infinity and The Sandbox, also gained more ground.
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