In 2021 so far we have seen a rollercoaster ride of events for Crypto in a whole. From the growing rate of crypto scams, stablecoins becoming a powerful force, NFT’s booming left and right and of course the increasingly popular institutionalization of cryptocurrencies. 2021 has been a wild ride for everything crypto related and after breaking down all the biggest trends, we’ll let you decide if 2022 if leaning toward the positive side for crypto.
NFT’s Are Everywhere!
In case you haven’t noticed or just live under a rock, NFT’s are absolutely booming. If you didn’t know already NFT’s or Non-Fungible tokens, essentially this means that it is one of a kind or in this explanation almost a collectors item. Unlike cryptocurrencies that have fixed values, therefore one cryptocurrency may be traded for another cryptocurrency that is the same or has the same value. NFT’s are non- fungible and cryptocurrencies are fungible, essentially meaning an NFT is unique and another NFT may not replace it’s value. This can define an NFT as somewhat of a collectors item.
Maybe it’s through this or pure social media craze that NFT’s have started to fully blossom. In late 2021 we have seen a number of famous celebrities announcing they are releasing their own NFT’s. To mention a few Melania Trump and Steph Curry have already announced their very own NFT’s. We expect that in 2022 NFT’s will likely be even more popular than what they have already become.
The Growth Of Defi
Defi is a rather vague term for Decentralized Finance. Decentralized Finance is essentially a wide range of projects and applications developed on the public blockchain, the goal of Decentralized Finance is to supplant traditional financing. These financial applications work by using smart contracts. Smart contracts are basically automated agreements that do not need any intermediaries to execute and can be accessed by any person with an internet connection.
Decentralized Finance applications typically allow users to lend, borrow and exchange currencies. However a massive benefit to these applications is that one may earn far higher interest rates than traditional financial services. This attracts many users.
An important trend that will surely surface more frequently in 2022, is the use of NFT’s and Defi together! How, you ask? Well paintings and artwork have been used as collateral in real world situations already. Therefore an NFT may help someone lending money to determine the collateralization amount in DeFi. Essentially the borrower would request a loan amount, with the NFT serving as collateral. The lender would evaluate the loan amount with the collateralized NFT and consider different aspects like the owner’s price tag, secondary market value, and their own calculations. This is just one case in which it could be used.
Central Bank Digital Currencies
In 2021 we have seen the emergence of many news broadcasts regarding countries considering using digital currencies. In China a virtual version of the Yuan had been placed into trials across several provinces. Though digital currencies may solve many issues that central banks face, a viable use of digital currencies would be issuing social grants to recipients. This would provide a much cheaper alternative.
However a large downside to central banks using digital currencies is, digital transactions will be subject to tracking, unlike cash that cannot be easily tracked. This essentially means that digital currencies could add to the government’s surveillance of their citizens. Majority of crypto supporters are trying to lean away from a centralized agenda, and this may be another way to force that upon citizens. We feel as though in the coming years CBDC’s will become increasingly popular.
The Institutionalization Of Crypto
Not only have we seen the first country in the world come to adopt Bitcoin as a legal tender this year, El Salvador. However we are seeing Bitcoin linked Exchange traded-funds become widely accepted. The Grayscale Bitcoin trust is arguably the main source for institutions wanting to add Bitcoin to their portfolio. The Grayscale Bitcoin trust has recently applied to becoming a Bitcoin EFT. Allowing many fringe benefits for institutional investors additionally they gain exposure to Bitcoin on their own terms in an extremely regulated setting, therefore without having to worry about security or custody issues. In 2022 many regulators will find it difficult to correctly regulate and license ETfs.
Stablecoins Are Here To Stay
If you didn’t already know, stablecoins are coins that are linked to specific assets that have a stable value, stablecoins are pegged to things like FIAT currencies or commodities like gold. Examples of a stable coin would be the leaders of the pack U.S Dollar Tether and U.S Dollar Cash, it’s value is pegged to…you guessed it the US Dollar.
With USDT boasting a market cap of $76 Billion and USDC following closely at $41 Billion. Stablecoins are becoming increasingly popular as they are a crypto investment without involving the volatility, as normal cryptocurrencies have. With USDT and USDC we have seen several other FIAT currency pegged stable coins. In 2022 we have no doubt that more stablecoins pegged to FIAT currencies as well as other assets will be sure to emerge.