Crypto Predictions for 2022; What Investors Could Look Forward to This Year

As we enter 2022, we can expect to see more cryptocurrency news related to government regulations, market volatility, and the desire of developing nations to move away from the American dollar standard or their national currencies (which can at times be more volatile than crypto). 

2020 and 2021 were arguably breakout years.The whole industry moved beyond hype and penetrated popular culture in ways purists had only been dreaming about for years.

In this week’s Netcoins Progressive Investor, we predict 2022 will be the year where meme coins fade into obscurity, regulators stay on top of stablecoins and inflation, and more. Please keep in mind this is only done for fun and is in no way a guarantee of what will happen in the crypto space.

It’s time to get excited about the future of crypto (while also pretending we’re psychic!).

Meme Coins Will Fade, Dogecoin Survives

Meme coins, most notably Dogecoin and Shiba Inu, each with a market cap of $29 billion and $802 million respectively, have taken dives like Bitcoin and Ethereum. Transaction volumes have decreased for the two canine-loving coins.

If 2021 taught us anything about crypto, it’s that community means everything. Getting people behind an idea or project can do wonders to market a coin and pump the price. Last year was full of rallying cries to the moon. In 2022, these rally cries may not be enough to resurrect projects that might be fun but have no fundamental value.

Elon Musk’s comments on Bitcoin and Dogecoin took both coins up and down. Will he be able to do the same in 2022? So far, the South-African entrepreneur is showing his voice/tweets still carry weight in crypto. For example, Musk provided Dogecoin with a use case – Tesla will accept $Dogecoin to purchase merchandise. In the long term, use cases will prove more sustainable and profitable. 

Analyzing market cap and token price are the most superficial metrics that may appear as (un)impressive. Savvy investors will look deeper at transaction volume to better understand the potential returns a project could provide. For now, Dogecoin seems to be the only meme coin with any real traction in those terms, thanks in part to Elon Musk.

Given what we saw last year, investors may still want to approach meme coins with caution due to their high degree of uncertainty. Then again, the same caution can be applied to Bitcoin and its volatile nature, although it has unique characteristics that should protect its value in the long-term. Mainly that it’s decentralized, scarce, hard to fake among many other attributes. 

Learn how to buy Bitcoin in Canada. 

Bitcoin Sell-Offs Follow CBOE: Volatility Index

Data from Arcane research shows how closely linked Bitcoin is to the CBOE Volatility Index (VIX). The CBOE VIX signals the stock market’s level of fear or stress by using the S&P 500 as a proxy for the broader market. It is more commonly known as the “fear index.” Levels above 30 demonstrate a high level of fear and uncertainty. 

So, how does fear in the stock market translate to crypto markets?

Put simply, spikes in the VIX are accompanied by Bitcoin sell-offs. These spikes and sell-offs may occur for several reasons. However, many times they tie back to the general financial market sentiments. 

Nonetheless, Bitcoin and the broader cryptocurrency markets are solidifying themselves as the future of the world’s financial markets. Bitcoin alone continues to outperform the S&P 500 and gold for the third year in a row. Although Bitcoin is not yet at a level that can impact the broader financial markets on a mass scale, it does dictate how the overall crypto market moves.

Investors may want to use the VIX as an indicator for how Bitcoin might move, and Ethereum and altcoins almost always follow. The VIX and the crypto-specific Fear and Greed Index may prove to be valuable tools for traders in 2022.

How these indices react to the looming regulation and inflation challenges in 2022 will be something to watch. After all, the $3 trillion crypto market cap is nothing to sneeze at. And as the market grows, the need for regulation (and controlling money printing and inflation) will grow too.

Crypto Regulation In 2022

Regulation, sometimes seen as a stifler of innovation, is coming to crypto. Financial regulation in the U.S. influences global financial markets thanks to the U.S. dollar being the de facto global currency. It is no secret that crypto can create a global currency that will be available for all people as a means to acquire digital property for financial prosperity. Crypto regulation will likely grow in the coming years. 

U.S. Government To Discuss Bitcoin Mining and the Environment (Plus, the Move to Proof-of-Stake)

The House Energy and Commerce Oversight Subcommittee announced a hearing set for January 20th where the environmental impact of crypto mining will be discussed. Proof-of-Work mining will be in the centre stage as mining hash rate dominance shifted to the United States following China’s mining ban in 2021.

The environmental impact of cryptocurrency contributes to much of the FUD seen in the news, where Bitcoin mining energy consumption rivals the energy consumption of some countries. This focus on energy consumption is fuelling more crypto projects to adopt a Proof-of-Stake approach to process transactions as it is arguably more environmentally-conscious.

ETH 2.0 is a proof-of-stake ecosystem, positioning itself to be environmentally sustainable while maintaining security and transaction speeds. Ethereum is arguably the birthplace for decentralized finance. Without it, this new, greener way forward may not even exist. One of the best tools in DeFi is the creation and use of stablecoins, which itself is also undergoing government scrutiny.

Stablecoins Will Heat Up in 2022

The advancement of stablecoins is an incredible crypto innovation that we have seen concisely. The ability for crypto to adapt to pressure and changes so quickly is very novel for global financial markets. If 2021 was the year of gas wars on the Ethereum blockchain, 2022 might be the year of stablecoin battles where each stablecoin will strive for market share dominance.

ARK Invest is getting into the stablecoin game by announcing their investment of $90 million into a special purchase acquisition company merging with Circle. For those that do not know, Circle is the principal operator of USDC. 6.93 million shares will be added to Ark Invests Fintech Innovation ETF.

This bold move into the stablecoin game will certainly fuel USDC’s attempts to overtake USDT as the dominant stablecoin – unless of course another stablecoin can overtake both centralized tokens.

More and more governments are looking at the potential threat cryptocurrency may pose to each nation’s sovereign currency. The evolution for Centralized Bank Digital Currencies (CBDCs) may be inevitable. We may very well see stablecoins’ dominance shift from one centralized token to another. 

Only time will tell what will happen. Crypto will undoubtedly remain in the news cycle. As the world turns every day, cryptocurrency increasingly enters the global economic and political stage.

Cryptocurrency Will Continue to Evolve in 2022

Regulation of cryptocurrency goes hand in hand with increased adoption. This is a good thing. The safer the environment feels for institutional investments, the more retail investment will flow into the space. We will likely see more traditional financial firms making big moves into the space following ARK Invest. 

It will undoubtedly be an exciting year to see how the stablecoin battles play out. Will decentralized projects dominate, or will centralized finance control an essential crypto tool? 

A New Year brings new excitement and a blank canvas for crypto investments.

Buying cryptocurrency with Netcoins is a great place to start. If you have not already done so, sign up for your free Netcoins account. Investors can fund their accounts with e-transfers, online bill payments, or by depositing other cryptos.

Grab your popcorn, hold on tight to your private keys and watch cryptocurrency have another historic year in 2022.