2021 was a volatile but very fruitful year for cryptocurrencies .
Market capitalization has tripled from less than $800 billion on Jan. 1 to about $2.2 trillion today, as some assets have generated astronomical returns in both price and number of users.
These increases were spread across the ecosystem as bitcoin (BTC) and ether (ETH) stopped making up 80% of market capitalization to make up over 60%.
In addition, the continued prosperity of Decentralized Finance (or DeFi for short) applications and non-fungible tokens (or NFTs) indicates that this year could be even more profitable.
Check out five grand narratives to watch as we start 2022.
1. More regulation
So far, the crypto industry has succeeded thanks (or despite) its decentralized structure and unregulated nature. But many in the industry will tell you that they are open to regulations as long as the standards are applied transparently.
Governments are trying to find a way to regulate cryptocurrencies in a way that deters cybercriminals and increases the security of retail investors.
China has demonstrated an (unpopular) way of doing this by making crypto activities illegal on its borders, except those sanctioned by the government (such as its digital yuan).
Crypto investors and entrepreneurs are hoping for a more moderate approach in the US, where the Securities and Exchange Commission (or SEC) and Commodity Futures Trading Commission (or CFTC) and Treasury Department offices are calling for new regulations .
For investors, regulations can provide clearer tax guidelines and even the ability to incorporate cryptoactive investments into retirement accounts.
And if big cryptocurrency trading tools conform to regulations, they can help boost adherence by providing an extra layer of security for investors.
2. Multiplication of BTMs
The intangible nature of cryptocurrencies has long worked against them. Many people have trouble regarding bitcoin as real money as they cannot see or touch it.
But now that installing bitcoin ATMs (or BTMs) is slowly becoming a reality in many parts of the world, people may be able to understand digital assets as tangible investment instruments.
The number of BTMs has been steadily growing since 2015 and reached new highs in 2021. Currently, there are nearly 35,000 BTMs around the world, according to Coin ATM Radar .
BTMs basically allow people to purchase bitcoin using their credit or debit cards. This makes cryptocurrencies highly accessible by enthusiasts and novices alike.
BTMs can eliminate the need for crypto brokers as people can perform crypto transactions using BTMs easily – though the fees still scare some people off.
3. Environmental improvements
Critics of cryptocurrencies target the environmental impact of blockchain networks, an issue that plagues even some crypto enthusiasts.
Bitcoin mining requires a lot of computational power, which uses a lot of energy.
Since much of the market capitalization of cryptoactives is generated by coins that use proof of work (or PoW) for their mining process, it is unlikely that there will be any major changes in energy costs in 2022.
In addition to the high energy costs of bitcoin mining, the process also generates a lot of electronic waste from the discarded machines .
On the other hand, newer cryptocurrencies such as cardan (ADA) and solana (SOL) are praised for adopting a proof of stake (or PoS) method , which does not require a high use of energy.
Ethereum, the second largest cryptocurrency, is about to move to PoS, which could make other cryptocurrencies do the same and make their processes much more sustainable.
If the adoption of environmentally friendly cryptocurrencies grows in 2022, it could be beneficial to the industry, even if Bitcoin's energy use improves.
4. Continuous bitcoin price volatility
Bitcoin is the largest cryptocurrency in the world and its price remains the most widely accepted benchmark for the crypto market.
In 2021, bitcoin performed consistently volatile, hitting a record high above $60,000 in April, dropping to below $30,000 in June, hitting a new record of nearly $70,000 in November, and then dropping to its current level below $50,000.
Volatility (the characteristic bitcoin critics highlight when disregarding the seriousness of the asset) is likely to continue into 2020, given that the crypto market is not yet fully mature.
Volatility is one reason why sophisticated traders like Bitcoin (their swings allow for arbitrage opportunities), but also why many asset managers urge caution and ask clients to allocate only 5% of their portfolio to cryptocurrencies.
Investors should be prepared for bitcoin to fall as well as rise.
What crypto advocates hope is that bitcoin and others will remain volatile in the short term, but will continually grow in value over the long term, despite periodic drastic fixes.
Furthermore, investors need to be patient and not worry about temporary ups and downs and commit to the long-term picture.
5. Crypto ETF Approvals
When BITO, the first bitcoin futures index (or ETF) fund, hit the New York Stock Exchange (or NYSE) in 2021, it hit nearly $1 billion in trading on the first day, breaking a record debut.
It was an immediate confirmation of investors' longstanding interest in a crypto product that they can buy and trade in traditional brokerages.
But BITO doesn't have bitcoins. It's a way for retail investors to get exposure to bitcoin futures, not bitcoin itself. It is not a “purely” bitcoin ETF.
The SEC has received numerous requests for ETFs based on the current price of cryptocurrencies, but has never approved one.
However, based on BITO's performance and the faith that investors have, a “spot” bitcoin ETF looks very likely to be approved in 2022 or soon – along with possible ETFs linked to other cryptocurrencies, which may attract a new wave of retail investors.
*Translated and edited by Daniela Pereira do Nascimento with permission from Decrypt.co .
The post Five cryptocurrency market trends to follow in 2022 first appeared in the Bitcoin Portal .