The year 2021 was a watershed moment for cryptocurrencies, as the COVID-19 outbreak drew a large audience to the market. The use of blockchain as the backbone of cryptocurrencies is thought to be the safest alternative to traditional money. Crypto firms are becoming more trustworthy as regulations are put in place. The crypto industry has made its way through and now accounts for approximately $2.79 trillion in market capitalization, making it the world's eighth largest economy by GDP.
The cryptocurrency sector and its major players are looking forward to seeing how the value of digital currencies changes in 2022. So, let's take a look at some major trends that will reshape the crypto industry and the financial sector, brought to you by C-Trade.
Crypto Trend #1: The emergence of Central Bank Digital Currencies
To slow the adoption of bitcoin, many countries around the world are developing their own Central Bank Digital Currencies (CBDCs). CBDC is a national digital currency that can be used to make legal payments. CBDCs can serve as a genuine and reliable alternative to current cash transactions if they are recognised as legal money.
CBDCs will gain in popularity in 2022, according to a bitcoin market study, because they are controlled by central banks and limit transparency between local and cross-border middlemen. The year 2022, on the other hand, will be remembered as the year when countries all over the world began to experiment with their own digital currencies. China will be one of the early adopters, as the country plans to release the digitized Yuan during the 2022 Olympics.
Crypto Trend #2: More ETF Launches fueling institutional adoption
We expect US regulators will develop an oversight structure that will allow cryptocurrency ETFs to start, given the rising investor interest in cryptocurrency and the fact that various countries across the world have already allowed these products to launch. The initial wave of ETFs, according to speculation, will employ options to get cryptocurrency exposure rather than outright cryptocurrency ownership.
A passive BTC, a passive ETH, and maybe even an active diversified cryptocurrency ETF are all possibilities. Over time, we expect investors to handle bitcoin products in their portfolios in the same way they do any other liquid alternative investment. This is inevitably going to cause widespread institutional adoption of cryptocurrencies which brings us to the next trend.
Crypto Trend #3: Crypto as a payment method
When Bitcoin was first conceived in 2008, its creator, the elusive Satoshi Nakamoto, envisioned it as a P2P electronic cash system that would allow payments to be made directly from one participant to another without the use of a banking institution. Businesses are beginning to accept cryptocurrencies like bitcoin as legal cash more than a decade later, improving the feasibility and utility of digital currencies in general.
El Salvador became the first country in the world to classify Bitcoin as a legal tender on September 7th of this year. All merchants in the country must now accept bitcoin if they have the necessary technologies. El Salvador's president, Nayib Bukele, has announced that the country's Chivo wallet is used by over 2.7 million individuals. Apart from that, Banco Bilbao Vizcaya Argentaria (BBVA), Spain's second-largest bank, has permitted its clients to trade and conduct transactions using cryptocurrency. Such scenarios are overwhelmingly positive, indicating that cryptocurrency could be accepted as a national currency by 2022.
Crypto Trend #4: The rise of regulations
HMRC (Her Majesty's Revenue and Customs) has issued a crypto guideline that covers transactions and taxation. Regulatory organisations in the United States have also passed a bipartisan measure that gives information on digital currency transactions.
Last year, the Spanish government established a new law that includes tools to prevent cryptocurrency-based tax evasion. New legislators and governments may begin to look into further regulating the sector to better how they monitor cryptocurrency transactions, in addition to the countries that already require crypto-asset holders to report both the value of their holdings and the interest received on those assets. This kind of trend is expected to be seen in India as well, where more and more people are engaging in crypto trading.
Crypto Trend #4: Increased emphasis on their carbon footprint
It's a well-known truth that bitcoin mining has negative consequences because it consumes a lot of energy, causing environmental disruption, which is a huge problem for the entire crypto sector. Considering environmental factors and efforts to protect it, 2022 will be a year of transition, with tech businesses preparing to develop effective solutions to make the entire mining process carbon-free.
Governments and individuals will recognise the importance of cryptocurrencies sooner or later, as they are here to stay. For cryptocurrency exchanges, people, and financial watchdogs alike, the year 2021 is crucial. To ensure the future of cryptocurrencies, regulatory organisations must work with cryptocurrency analysts to streamline regulations and incorporate identity verification technologies. Participate in the latest crypto trends on C-Trade today!
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. C-Trade, its affiliates, agents, directors, officers, or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.