The year 2021 was marked by several major breakthroughs for cryptocurrencies.
On the one hand, new cryptographic applications such as non-fungible tokens (NFT) gained ground, with the configuration of the sales of these digital assets. new records in the main auction houses. Second, Bitcoin moved towards widespread acceptance and major websites like Expedia and Microsoft accepted the currency as a medium of exchange. Third, in September The Savior became the first country in the world to accept bitcoins as legal tender.
There are many more examples of how the cryptocurrency market has expanded in the last year alone. With this spike in activity, what’s next in 2022 for cryptocurrencies?
We believe there are three main areas in which cryptocurrencies will gain traction in the coming year: increased acceptance of Bitcoin as a means of payment, increased regulatory scrutiny, and increased NFT activity.
The Bitcoin Embrace
Understanding what motivates people to adopt Bitcoin has been a challenge for researchers. A recent study suggests five main factors that contribute to the likelihood of someone using Bitcoin:
- Trust the system
- Word of mouth online
- Quality of the web platforms available for the transaction.
- Perceived risk of the investment
- Expectations on the performance of Bitcoin
Conditions in the crypto space have made it increasingly likely that Bitcoin will become mainstream in the near future.
First, there is increased activity in online communities like Twitter. and Reddit, where even crypto beginners can exchange information with experienced investors for word of mouth advice on price predictions and trading strategies.
Second, there has been an explosion of new crypto exchanges – or trading platforms where you can trade fiat currency for crypto – and major investments in the technological infrastructure of existing exchanges. These investments in infrastructure have expanded access to crypto markets and have also piqued the interest of institutional investors.
Institutional participation, regulatory scrutiny
The last year has seen institutional actors such as European Investment Bank (EIB) – the lending arm of the European Union – take a stand on cryptocurrencies.
In April, the EIB issued a € 100 million digital bond in the Ethereum blockchain. Goldman Sachs, Banco Santander and Société Générale also participated in the issue. Research has pointed to institutional adoption as a tipping point for mainstream crypto adoption, and we seem to be heading there fast.
Taken together, the increased availability of outlets that accept Bitcoin as a medium of exchange and institutional investment in the space will likely lead to a greater acceptance of Bitcoin as a payment method in 2022.
After cryptocurrencies, decentralized finance (DeFi) It is widely regarded as the next frontier in fintech. DeFi provides the opportunity to create decentralized systems that are based on distributed ledger technology to facilitate peer-to-peer loans, create new financial values as stable coins or even offer new models of corporate governance.
Regulators also seem to be paying more and more attention. In November, the European Council, the body that defines the political priorities of the European Union, announced his position about him Market framework in crypto assets (MiCA), which will provide greater regulatory clarity on crypto assets and DeFi.
In the same month, the Board of Governors of the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency of the United States prepared a joint declaration announcing that they would produce a set of policy directives on cryptography.
Researchers have noted lack of regulation as a major barrier to acceptance of mainstream crypto. Increased government oversight, along with the decision of several countries to consider digital versions of their national currencies, they are likely to generate much more regulatory activity in 2022.
An increase in NFT activity
The year 2021 brought a new NFT sales wave. An NFT may offer proof of ownership of, for example, digital art In the same way, a physical canvas can offer proof of ownership of a Vincent Van Gogh painting.
As new NFT applications emerge, this space is likely to continue to grow in 2022.
Despite these investment opportunities, we urge crypto investors to be skeptical of the claims they read in online communities. At a minimum, crypto enthusiasts should do their due diligence before investing.
What will surely emerge in 2022 are new scams and schemes. Take, for example, the Crypto by SquidGame which capitalized on the popular Netflix show, but it was a fraud. Wave fake Banksy NFT It sold for £ 244,000.
Research on the behavior of retail investors he has found that some are highly susceptible to “fear of missing out.”
So it can be difficult to turn down advice from your stylist or your best friend’s cousin on the next crypto opportunity. However, crypto investors need to educate themselves on the technology and basics of financial markets if they want to get involved wisely.
Cryptocurrencies, after all, are still speculative and they are not for everyone.
Erica Pimentel, Assistant Professor, Smith School of Business, Queen’s University, Ontario; Bertrand Malsch, Associate Professor of Accounting, Smith School of Business, Queen’s University, Ontario, Y Nathaniel loh, Junior Fellow of the CPA Ontario Center for Corporate Reporting and Professionalism, Queen’s University, Ontario