Rodrigo Vicuna
Cryptocurrency and blockchain had a breakout year in 2021.
Just look at the numbers: 80 million unique crypto wallets; Bitcoin and Ether grew 60% and 407%, respectively; El Salvador adopted bitcoin as official currency; the NFT market generated $2.5 billion in trades. Even Burger King announced a whopper when they got in on the NFT action. Impressive? Absolutely. Have we reached a point where crypto and blockchain reach mass adoption? Well, not quite.
Even though DeFi, cryptocurrencies, blockchains, NFTs and a slew of other products came online in 2021, only about 1% of the world’s population has a unique crypto wallet. Media coverage, financial institutions, and companies with hefty marketing budgets jumped in and made it seem as if mass adoption was already here. But in reality, we’re not there yet.
However, we anticipate that changing in 2022. From more creative crypto entries to the impact of inflation and new technologies, here are five trends we expect in 2022, and what you can do to navigate the challenges ahead.
Expect more diverse uses for crypto
For the most part, consumers are aware that crypto exists, but they don’t understand its benefits in their day-to-day lives. For many, it’s seen as an investment tool for institutional or retail investors, a novelty, or something that caters primarily to the trendiest of the Gen Z crowd. With blockchain games and GameFi, as well as reward redemption platforms that trade airline miles into crypto on the horizon, expect this to change in 2022.
We’ve seen some of this already in 2021 with NFTs that cater to art collectors and sports enthusiasts. We’ll see it branch out into other areas such as wine, sneakers and other collectibles, bringing in new users.
For the mass consumer, understanding these technologies can be challenging, but when NFTs are tied to something they know and are enthusiastic about, it’ll start growing among that community. Keep an eye on enterprising companies pushing into these areas – specifically collectibles – as a way to broaden the reach of crypto and blockchain in 2022.
A surge in crypto apps
Crypto is considered technically complicated to hold, and for the layperson, even the terminology is difficult to understand. Crypto and blockchain need to be easy to use and understand before mass adoption can happen, and that’s what we’ll see in 2022.
Cheaper blockchains are allowing new users to onboard with DApps, which are decentralized applications that run on a P2P or blockchain network. They don’t require users to submit their personal information. It’ll start with global digital asset payments, recurring buys, or tipping, but will grow to include multiple types of transactions, which will only increase user adoption.
Consumers love seamless transactions. That’s why we will see mobile apps flood the space in 2022. Anyone that can make the process simpler for the average user will look to create an app that will take advantage of this market. So far, it has been slow and expensive to develop apps, but with new technologies such as DApps, it will become faster and cheaper to develop and could help unlock mass adoption.
A byproduct of this will be the continued consolidation of crypto apps from payment platforms to crypto lending and staking reward wallets, accelerating consumer usability and utility from DApps.
Countries outside the U.S. will adopt crypto
El Salvador made waves when it adopted crypto as legal tender, but that was just the start. In 2022, more countries — especially in Latin America and Asia — will adopt crypto in some way as legal tender (with the obvious exception of China for the moment).
Right now, the U.S. is the leader in crypto adoption, but as it spreads, expect other countries to adopt crypto and blockchain at a far greater scale. In other countries where there is less confidence in the financial system, crypto can gain more of a hold on day-to-day transactions, rather than the investment asset it is now in the U.S. This has the possibility to innovate new technologies and open up use cases that we haven’t yet thought of.
Increased regulation
Mass adoption of crypto and blockchain isn’t quite here, but increased regulation could push it over the edge. It might seem counterintuitive, but more regulation provides more guidance, which provides reassurance for institutional and mass use.
News cycles portray crypto as volatile investments, and DeFi has been sort of a Wild West in terms of the nature of the market. Regulatory clarity can rein in some of that and put guardrails around the market. This provides stability, support and confidence.
Government regulation might not be welcomed with open arms by some in the crypto community, and needs to be a balance between creating a safe environment and stifling innovation, but regulation is absolutely critical and will help the industry evolve into a lower risk asset class with clear paths toward consumer adoption.
Inflation and the market
If crypto and blockchain were one of the biggest financial stories of 2021, the other was certainly inflation. With inflation hitting 7% over 2021, the highest rate since 1982, it’s on the minds of consumers, institutions and the government. Enter the end of quantitative easing and rising interest rates.
It’s likely it will take time for the U.S. Federal Reserve to raise rates sufficiently to curb inflation. Financial institutions and retail investors will continue to have a growing interest in cryptocurrencies to hedge against inflation, which makes them likely to remain a driving force behind mass adoption. Because of this, we’ll see increased institutional and retail acceptance of blockchain and digital infrastructures.
In order to better protect these investments, we can expect these institutions to also be a driving force behind safer, more stabilized platforms for exposure to cryptocurrency. To reassure customers, comply with regulators, and instill confidence in the market, we’ll see stronger compliance programs around digital assets and more concrete ways to measure compliance.
For example, a collector recently had millions of dollars of NFTs stolen (they were eventually retrieved). These stories spook the market, and financial institutions don’t want a jittery market. Along with more regulation from central governments in 2022, expect financial institutions to also take the lead on creating safer platforms.
Mass adoption
Well, not really. This is the one area that we don’t see happening in 2022. But that’s not to say that it isn’t plausible in the near future and that significant progress won’t be made.
Even though cryptocurrency and blockchain adoption have grown at a breakneck pace over the past few years, there is still a long way to go before true mass adoption can occur. Like we said, the numbers are impressive, but they are small compared to the traditional centralized financial market.
Take advantage of these trends now
If 2021 is any indication, 2022 will continue to be a roller-coaster ride for crypto and blockchain.
There are a few steps you can take now to position yourself for success in 2022:
- Report your activities: Nobody likes filling out their taxes. This is an area that is often overlooked when talking about crypto, but can be a headache for the average consumer. There are great tools out there that can help make this very easy.
- Prepare for more volatility: There will be swings in the market; that’s part of the ride. If you’re an entrepreneur, have a long-term strategy and build a strong technical platform focused on making crypto use easier. Both moves will pay dividends down the road.
- Diversify: Whether it’s blockchain gaming or reward wallets, look to diversify your engagement in the space to use cases that reach the most potential consumers for possible adoption.
- Take advantage of Layer 1 chains and Layer 2 solutions: Layer 1 networks like Solana and Avalanche are positioning themselves as alternatives to Ethereum. Look to invest in Layer 2 solutions that will improve transaction speeds.
Final thoughts
With market volatility, a midterm election year, increasing inflation and the impact of central markets, it’s difficult to know exactly what will happen in 2022. Still, we predict that the sector will see more mainstream coverage, attention from investors and movement toward mass adoption. New regulations are around the corner, and the market will embrace the stability they will bring for retail clients as well as institutional investors.
Finally, expect more news and use cases to come from parts of the world other than the U.S. Being prepared and nimble is essential, and if 2021 showed us anything, we know there will be no shortage of wild rides in 2022.
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