There has been a lot of dramas in the crypto space in 2021. We are witnessing another year’s end where most cryptos have a firm ride on the bullish line. We witnessed different cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) reaching a new set of all-time highs. But there is an important question we need to ask ourselves due to the increased optimism happening in the crypto sphere.
We need to ask if this increased crypto adoption will continue next year amongst institutions, investors, and governments. This question is as important as asking about the sustainability of digital assets. At the same time, we face a new era of possible adoptions, regulations, and creations of central bank digital currencies (CBDCs) by different governments globally.
Analysts and market observers believe that 2022 will come with increased crypto adoption. Likewise, they are optimistic that individuals and institutions will leverage it as an investment medium, inflation hedge, and as a means of making payment for goods and services.
It won’t be easy for the market when it comes to adoption. That’s because some governments will reject cryptocurrencies without thinking of adopting them. But the healthy market signs being pointers of increased adoption and utility, we may believe that crypto adoption is likely to happen more than crypto rejection.
2021 Prediction Accuracy
In 2021, industry experts had predictions that Bitcoin will experience significant institutional interest as a form of investment. This happened as we see the current bull run having the most prominent backing from institutional investors.
Predictions had it that Ethereum (ETH) would continue growing to the point of reference in the space, and they were optimistic about the future of decentralized finance (DeFi). Both happened because ETH became very pivotal in utilizing DeFi as it accounts for about 70% of its value. This is obvious as we saw DeFi’s stock value rising from $21 billion to $241 billion asset value.
Another great prediction that is playing out already is the increased number of platforms and protocols that are interoperable. As a result, chains will have more resources, and there will be an increased value associated with them. This prediction came happened with the launch of cross-chain bridges like Avalanche Bridge and Wormhole.
Since all of these happened as predicted, we must examine some possible scenarios that may play out towards crypto adoption in 2022. As such, some industry players laid some predictions in the digital asset space.
Increased Institutional Adoption
With the critical examination of how institutional adoption has led to the bull market gaining momentum, analysts are optimistic that we will experience more institutional adoption will occur in 2022. This will result from the need for institutions to use crypto adoption to save themselves from the growing inflation and how crypto will be more normalized as in the case of new exchange-traded funds.
The launch of the ProShares will force the U.S. regulators and other regulators across the globe to be less resistant towards different kinds of BTC and other cryptocurrencies ETFs that will emerge. This will lead to more institutional adoption wherein cryptocurrencies will become investment options onward.
Likewise, Bitcoin ETF’s launch will make institutional crypto adoption sophisticated because traditional institutions will leverage it to create enhanced retirement plans and pension funds and utilize them with the accord of brokerage accounts.
Meanwhile, the more significant segment of crypto analysts believes that predicted institutional adoption depends on different factors. But since this adoption has led to substantial bull runs in the past weeks, we will see more of such adoption as institutions will leverage it to beat inflation.
On the other hand, there will be more institutional adoption in the crypto space if the US Securities and Exchange Commission (SEC) legalizes a spot ETF where BTC is held as part of the funds. Likewise, institutional and retail investors who are skeptical about crypto involvement due to regulation will become more confident and comfortable while leveraging EFT to participate in the market.
Due to the increased pressure around the Federal Reserve and general apex banks, we should expect that there will be increased capital flow from conventional inflation hedges to Bitcoin. Meanwhile, others argue that institutions will keep embracing Bitcoin and other crypto-assets regardless of SEC intervention because the market has never stopped growing.
BTC and Other Cryptos Becoming a Legal Tender
In September, El Salvador announced Bitcoin as a legal tender for its citizen. As a result of this, we should expect those nations will follow suit in this cause. However, the possibility of this happening largely depends on the turnout of El Salvador’s crypto adoption. Countries will observe the economic implications and use El Salvador’s case as a model to improve while making cryptos a legal tender.
When you look at it from El Salvador’s legal adoption, countries will either adopt it like El Salvador or do some partial adoption. If, on the other end, El Salvador’s economy shrinks with this adoption, nations will find other means to adopt crypto, especially countries that have weak economies and currency conflicts.
Although countries may not come outright to use crypto as a legal tender, it is apparent that the inevitable that occurred with institutional adoption will likely happen with nations adopting Bitcoin and other cryptos as legal tender. This is becoming more of an echo from the Latin American side.
More of CBDCs to Occur
As much as the crypto market is booming, governments across the globe will show more interest in central bank digital currencies (CBDCs) than Bitcoin or other public cryptocurrencies. This is because they believe that with regulated and centralized digital assets, governments will be able to monitor cash flow and track down individuals or parties that want to leverage crypto for their illicit activities like money laundering.
Likewise, we should expect countries that feel intimidated by Bitcoin and other cryptos to embrace CBDCs instead of tending towards public cryptos. On the other end, we saw Ukraine making a bold move to legalize Bitcoin as legal tender just a day after El Salvador’s announcement.
Governments will gravitate towards CBDCs as a means to provide improved financial systems for internal and global use. Likewise, some governments will resist this because they don’t want to lose control of their economy. We saw this with some countries that oppose using the internet.
Crypto Payment Options Will Gain More Momentum
As much as retail and institutional investors will leverage cryptocurrencies when it comes to payment, some are resistant because the investment value outbids payment values. But the involvement of CBDCs in the space will increase the adoption of this trend in 2022.
As such, we should expect individuals and merchants to leverage cryptocurrencies as payment options in 2022 as we saw increased adoption in 2021 as investment options. Thus, we will see more crypto transactions used to sort goods or services purchased. An example is the innovative incentive system happening in the gaming and talent networks spaces.
Final Thoughts
2021 came with manifestations of crypto predictions from market bull run to increased institutional adoption. Analysts and observers believe that 2022 will come with sophisticated adoption as an investment and payment option due to increased institutional adoption.
2021 came with lots of goodies. We should expect more crypto goodies to occur in 2022.
