2021 proved to be a watershed year for decentralized finance in the form of cryptocurrencies in various forms – NFTs and others. Consider these numbers – January 2021 market capitalization was ca. $800 billion. By the end of 2021, the total locked value is $100 billion (USD) for just one crypto. The company that holds this distinction is Ethereum.
The rising popularity of NFTs has been surprising, thanks to GameFi and Metaverse. Not many experts could have predicted these developments. Some experts expect to see some interesting things happen in 2022.
2022 predictions for the DeFi market
1. Bitcoin prices to breach the $100,000 price market
That inflation is on the rise globally, investors are looking for relatively safe places to park their money. Bitcoin is a much sought after crypto and not much in circulation. With just 21 mil. BTCs in circulation and wide adoption by many institutions, experts predict that the price will touch the $100,000 mark.
2. Ethereum platform to get an upgrade
Ethereum is still a dominant force in the market but has a few problems. Work is underway to upgrade so that Proof of Stake is complete. This will help the company have a native staking infrastructure like Coinbase. Ethereum is one crypto that has great potential thanks to its huge transaction volumes.
3. Increased sustainability of investments in crypto
Companies and financial institutions are getting more interested in not only investing but also offering these services to their customers. This is an evolving issue, and it looks like that adoption is going to rise.
4. Introduction of Web3 infrastructure and decentralization of the internet
Web3 is a novel concept which is expected to make internet architecture capable of decentralization. It can be configured to be autonomous to use blockchain technology easily. At the core, it is all about cutting down on dependence on big networks and service providers so that data is handled in a transparent manner.
Web3 is expected to make it easy to choose from different providers and have a good price structure.
5. NFT and gaming income
Metaverse, a virtual platform has become very popular with gamers. Here, people collaborate and trade at affordable prices and it has been made possible thanks to NFT and infrastructure based on blockchain technology. Axie Infinity was the main reason for this change in 2021. Over a million people used this gaming method to make a lot of money. Expect more in this arena in 2022.
6. Rise of the multi-chain world
Thanks to the smart contract enabled blockchain world, we can expect to see more of the same. Multi-chain worlds are going to propel the transfer of value and information easily among people. Experts are of the opinion that the dependence on Ethereum and TVL will go down with the availability of more blockchain solutions which are public.
7. More clarity with regulations and prohibitions
Many countries will let their opinions on the handling of crypto assets be known. This will include information on restrictions, bans and how they plan to approach the adoption of cryptocurrency. Issues such as AML, taxes and others will be addressed.
Officials in many countries are already talking about regulations and how to set up a legal framework to offer clarity on providers and how to issue crypto assets.
8. Digital Euro as a stablecoin
Many countries are testing and offering central bank digital currencies. The European Central Bank is expected to offer a CBDC only in 2026 or later. Small countries like the Bahamas have already adopted CBDCs and expect 70% of citizens to use this modality.
It is important that central banks get involved because digital currencies linked to specific currencies is not yet in wide use.
9. Institutional adoption of cryptocurrency
Increased adoption and investment by many people has resulted in big companies and investors showing an interest. With rising inflation and low investment rates, big financial houses like Goldman Sachs have gotten into this field. They now offer opportunities in cryptocurrencies.
2022 is expected to be a seminal year for cryptocurrencies and other instruments in many ways. Individuals will have to invest carefully after doing their own research and understanding the mechanics of this new method.