Wouldn't it be great to own a crystal ball and see what the future has in store for investors and the financial markets?
Well, there is no such a premonition device, but our analysts provide a data-based breakdown to let you know what there is to look forward to in 2022. The big players who may enjoy fortunes in finance and investing in 2022 are none other but cryptocurrencies, Non-Fungible Tokens, and Metaverse projects.
Let's take a closer look!
2021 was a year to remember for cryptocurrencies. The crypto market gained more adoption into economies and experienced several breakthroughs. Bitcoin reached its all-time high of over $65,000 three times - in February 2021, April 2021, and November 2021. People have never been interested in crypto in any other year as they did in 2021. In 2022, we expect to see more investors trooping into the crypto market. So, what might we expect in the Cryptocurrency market in 2022?
1. Cryptocurrency market performance
Before we talk about a few specific cryptocurrencies trends for 2022, perhaps we should remind you that the crypto market has seen a steady rise in market cap and token prices in the last 18 months. Just about how long COVID-19 has been around too.
In addition, the cryptocurrency market has suffered
Though crypto assets come with short-term volatility, you can't ignore the upward trend in its long-term history for over two decades now. Looking at this history, it is expected that the upward projections would continue into 2022 and the years that follow it.
Challenges of the cryptocurrency market
There were a number of ups and downs in the cryptocurrency market in 2021. The market has suffered from government regulations and restrictions in different parts of the world.
The topsy-turvy trend does not look like ending as the global crypto market has been experiencing a significant selloff since the beginning of 2022. The Russian central bank banned the usage and mining of all cryptocurrencies due to fears about the financial stability of crypto assets. Consequently, traders are concerned about the market's liquidity being impacted by the tapering of quantitative stimulus and interest rate rises.
As of the time of this writing, Bitcoin is below $40,000 and is about 40% off its record high value in November 2021. This recent drop has snowballed, with most altcoins also dropping in value.
However, the strong pedigree of Bitcoin and other crypto assets like Ethereum signals an imminent bullish trend. More so, the acceptance of cryptocurrencies is growing by the day and the much-needed financial infrastructure is being built. Ultimately, the success of one cryptocurrency does not indicate the same for other crypto assets. This is why comprehensive research is important before investing in the cryptocurrency market.
2. The year of Altcoins
As Bitcoin and Ethereum become more mainstream as investments, the interest in other altcoins is likely to surge in 2022. To keep it crisp and concise, we will explore altcoins by sector.
Layer 1 cryptocurrencies
Layer 1 cryptos are the backbone of the cryptocurrency industry. Currently, many projects are competing for market share and being the go-to alternative for Ethereum. However, the most likely scenario is that only a handful of projects will come out ahead. Let's look at some of these projects.
Solana (SOL) - Solana is currently the superstar alternative of Ethereum. Its cheap transactions and speed is attracting developers and institutions' interests. However, it experienced several technical issues at the start of the year, and it isn't entirely clear if it can bounce back to its momentum.
Elrond (EGLD) - Although it has not hit the highs of Solana, Elrond is an interesting smart contract cryptocurrency. With its recent purchase of Crypto payment vendor Utrust, its Maiar DEX, and the number of projects on its ecosystem, it's a project worth watching.
Cardano (ADA) - Cordano is unique compared to other Layer 1 Altcoins. Its research-driven approach allows it to solve future problems such as the impact of quantum computing. Cordano already has several projects, and following the launch of smart contracts in early 2021, investors might expect to see the rollout of more projects on Cordano.
Layer 2 cryptocurrencies
Layer 2 solutions are built on top of existing Blockchains to improve their performance and allow different networks to communicate.
Polkadot (DOT) - 2021 saw the rise of alternative Layer 1 projects to Ethereum. However, interoperability between these projects is still an issue. Polkadot solves this issue by allowing Blockchains to talk to each other. As developers start to build on different Layer 1 Blockchains, interoperability will be crucial, so Polkadot is yet one of the projects to keep an eye on.
Polygon (MATIC) - Until Ethereum 2.0 upgrade is completed, Polygon will play a crucial part in helping projects reduce cost and solve network congestion issues on Ethereum. Vitalik Buterin recently addressed the Ethereum scalability issue, stating that the network is not ready for mass adoption. Consequently, Polygon still has a role play.
3. A potential global shift towards Decentralized Finance (DeFi)
The future of a financial system with DeFi might lead to the mass adoption of DeFi by financial companies, governments, banks, and other institutions. In 2022, we might see the beginning of a shift by global fintech companies as they look to enter this market with better and scalable blockchain solutions.
Experts like the Co-founder of DappRadar labs, Dracos Dunica, believe that the DeFi sector is poised to remain unshaken and continue to grow. He also states that we might even see governments and financial institutions launch their DeFi platforms and initiatives.
To add to that, it's worth keeping an eye on the following DeFi coins, which could have an outsized impact on the DeFi space.
Aave (AAVE) is one of the top lending platforms built on the Ethereum blockchain. Aave entered 2022 with several exciting projects, such as the Aave Arc - a permissioned liquidity pool that will offer institutions a decentralized lending platform. The team at Aave is also looking to build a decentralized version of Twitter. Investors might expect to see a lot of activity on Aave in the course of 2022.
ChainLink (LINK) - In 2021, Chainlink integrated more than 300 projects, most of which are DeFi and Blockchain, followed by data providers and nodes. It continues to appeal to more and more Web 3.0 developers. Moreover, LINK price has outperformed with 50% gains in just the first weeks of 2022.
4. What will happen to the Top Cryptocurrencies?
Ethereum's market cap has been rising relative to Bitcoin; hence the price of ETH in Satoshis has also been on the rise. Throughout 2021, the ETH/BTC pair has risen over 400%. This has been driven by DeFi demand and protocol upgrades like the EIP 1559 and the NFT mania.
Arcane Research believes that this is likely to continue, and eventually, ETH might flip Bitcoin's market cap. ETH's market cap is half that of BTC, and 2022 will be pivotal for Ethereum as investors are likely to see the proof-of-stake merge by the end of Q1 of 2022 which is a significant transition to Ethereum 2.0.
Where Bitcoin was praised as the digital answer to financial services, NFTs are now being touted as the digital answer to collectables, digital assets ownership, and the next step in the art sector.
If you're truly a Blockchain enthusiast, you must have heard about this rapidly evolving sector aside from cryptocurrencies - NFTs.
After a successful year in 2021, will the NFT trend continue in 2022? Here are a few NFT trends the crypto world might have in store for us in 2022.
1. Gaming Metaverse and NFTs will continue to grow
The metaverse is upon us, and while we are thrilled to experience how our lives will change in the metaverse, we cannot ignore the role NFTs will play for you either as a creative creator or investor.
People will own virtual lands on the metaverse, and the current rapid growth in the virtual real estate sector is only a shadow of what is to come.
Decentraland or Sandbox are platforms you can use to interact with virtual worlds and inhabit them. With these platforms, you can buy, sell and own real estate on the virtual space, and if you want, you can even develop your real estate properties.
2. Incorporation of NFTs into Multinational Corporations
Recently, payment giant Visa partnered with Micah Johnson, the renowned digital artist, to enter the token world. Recall that they earlier purchased NFT Cryptopunk #76100 for $150,000.
Social media giants Facebook stirred massive attention towards the Metaverse sector when they announced their Meta project. Coke is also on the NFT news by teaming up with 3D designers at Tafi to host an auction for limited-edition virtual loot boxes of NFTs.
More prominent corporations are joining the metaverse world through NFTs, and Nike is preparing to join too. Nike filed seven trademark applications indicating that they want to make and sell virtual branded sneakers and apparel for metaverse projects!
Experts believe bigger global corporations could jumpstart this adoption even more in 2022.
3. An NFT future for the Art Sector
As an artist, Blockchain allows you to represent your art as an NFT and receive unlimited royalties, unlike physical art, where you'd have to forfeit all your ties and rights immediately after you sell your art.
With smart contracts, after your initial sale, your NFTs can be programmed to allow you receive percentages of payment every time your NFT art is being sold, even after your initial sale. It ranges between 5-10%.
Nevertheless, with more art world insiders exploring the possibilities offered by NFTs and the money they attract, many share Johann König's optimism that the technology's reach will continue to grow in 2022.
4. Fractional Ownership of digital assets
Ever heard of fractionation on NFT?
Relax, I'm about to show you one of the wonders of NFT. Fractionation allows you to co-own NFT assets. Since it costs a fortune to purchase certain NFTs and many people cannot afford them, you can partner with other people to own NFT assets through fractional Ownership.
You own a part of the NFT, and you retain the opportunity to invest in several other NFTs. Despite the current real estate laws and regulations, we are likely to see Real estate companies invest heavily in the NFT space and try out fractional NFT ownership as a new investment vehicle. Platforms like Futurent plan to launch fractional real estate properties using Avalanche or Polygon in January 2022.
As 2022 fast approaches and the Cryptocurrency and NFT market grows in value, it might be suitable time for investors to consider diversification to get a feel of this revolutionary market. Research conducted by Morning Consult reveals that 29% of US adults want to get involved in NFTs. So, it is only wisdom for investors to be on the lookout for the progress and events that unfold in the NFT space as we proceed into 2022.
These perpetually successful large corporations can't be all wrong at the same time as they also make moves into the Cryptocurrency, NFT, and metaverse world.
*Please be aware that cryptocurrencies can drastically fluctuate in price.
Risk Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade, and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not consider your investment objectives, financial circumstances, or needs.