The coming year should prove to be an important one for cryptocurrencies as the decentralized financial (de-fi) economy continues to expand and, according to industry experts, increased participation from individuals and institutions is seen.
Crypto saw both incredible highs and lows in 2021, with Bitcoin hitting its all-time high as well as one of the biggest slumps in the crypto market when that figure was halved. That year, non-fungible tokens (NFT) also reached mainstream awareness as celebrities ventured into space with their own products.
But what does the next year hold for De-Fi and crypto?
The future of crypto will depend on three main factors: energy efficiency, acceptance, and regulation.
Regulation will prove especially important after a big change in 2021, when the federal government decided to tax cryptocurrencies the same way a stock would be – thanks to the legislation in Biden’s infrastructure bill.
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Alex Lemberg, CEO of Nimbus, believes regulators will be “a little kinder” and “better prepared” to start regulating the space.
“Institutes have already found investment vehicles and structures to participate regardless of participation, but I think – from the perspective of both the federal and local government – this will continue to grow,” Lemberg told FOX Business.
Jan van Eck, CEO of investment firm VanEck, told Barron’s that he sees Washington “at a standstill” with regard to regulation, without moving “in any direction.”
And that will enable the retail adoption that has long served as the biggest limiting factor in crypto popularity: both the biggest rise and fall in the value of Bitcoin came around Elon Musk’s sweeping declarations that Tesla was making crypto payments first accepted for cars, then turned around and said his company would no longer accept cryptocurrencies because of their harmful effects on the environment.
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One of the more interesting ways crypto can see improved adoption of crypto as a payment for income.
Using crypto for income isn’t as prohibitive as it seems, as individual stakeholders can buy fractions of a currency. Using this mechanism, Bitcoin managed to hit its high of $ 67,582 on November 8, 2021, while otherwise it would cap its value closer to $ 4,000. Block.One founder Brock Pierce told Crypto Potato that he believes Bitcoin will cross the $ 200,000 mark in 2022.
NYC Mayor Eric Adams and Miami Mayor Francis Suarez have demanded at least part of their paychecks in the form of cryptocurrency, as have athletes such as NFL players Odell Beckham Jr. and Aaron Rodgers. Suarez even pushed for Miami to create the first city-sponsored cryptocurrency, MiamiCoin.
“I think this will be another catalyst that will encourage adoption,” argued Lemberg. He also mentioned Metaverse’s “play-to-earn” mechanism as a major indicator of future, innovative ways companies will integrate cryptocurrencies.
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Introducing Proof-of-Stake (POS) instead of Proof-of-Work (POW) can also help increase attendance and improve cryptocurrency adoption in areas that have traditionally been difficult to enter. The biggest benefit that POS would offer would be that the energy consumption of crypto would decrease significantly as the incredible investment of time and machines would no longer be required to solve equations and earn a token on the blockchain.
The move might resent miners who got their stake through proof-of-work, but Lviv predicts the energy benefits of proof-of-stake will improve the cryptocurrency’s public image.
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No aspect of De-Fi has gained greater acceptance than NFTs, which are digital collectibles that can be traded and exchanged. The market exploded that year, reaching a volume of $ 23 billion. Everyone from Ozzy Osborne to the NBA announced NFTs to capitalize on the trend and make money from the rising flood of value.
Adidas launched its “Into the Metaverse” NFTs and grossed more than $ 22 million.
Van Eck believes cryptocurrencies will also be put to the test as a store of value as inflation remains a major concern. Should currencies stay strong while traditional currencies continue to fluctuate, public acceptance could increase.
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But that rollout is unlikely to come in the form of an ETF as the SEC is likely to push for jurisdiction over any cryptocurrency market, which would ruin the point of a de-fi economy.
“It is clear that the SEC wants jurisdiction over the cryptocurrency markets,” Van Eck told Barron’s. “It doesn’t look like they’re going to approve a Bitcoin ETF unless they’re forced to do so by federal court.”
