The future of crypto in 2022 and ahead

Will cryptocurrency replace cash? Is it the future of money? Will it supersede the dollar?

Questions like these fill the pages of Reddit and Internet investor forums.

The truth is, we don’t know, but we can measure some telling cryptocurrency trends that are happening in 2022. Namely:

1. Cryptocurrency’s impact is growing

The global cryptocurrency market and the blockchain ecosystem is expanding.

• Capitalisation in 2021 smashed all previous records nearing $3 trillion (£2.2 trillion, with Bitcoin remaining the largest by market cap.
• Although investors remain interested by alternatives – notably Ethereum, Solana and Polkadot – BTC remains the most popular and highly valued crypto asset, despite high volatility over the course of its history.

2. The push for green blockchain

Across 2022, attempts to “greenify” blockchain and find renewable sources to power them are likely to gain momentum

• A growing awareness that blockchains are created or ‘mined’ by high-powered computers which guzzle energy and create high levels of carbon emissions is prompting a move towards finding less energy-intensive models of blockchain technology.
• “We believe that cryptocurrency will eventually be powered completely by clean power, eliminating its carbon footprint and driving adoption of renewables globally,” has said Square CEO and co-founder Jack Dorsey. “Published estimates indicate bitcoin already consumes a significant amount of clean energy, and we hope that Square’s investment initiative will accelerate this conversion to renewable energy.”

3. Growth in the NFT market

NFT sales hit $25 billion in 2021 as the speculative crypto asset market hotted up.

• The craze for collections such as Bored Ape Yacht Club and Matrix avatars which are turning digital images into major investment assets.
• Non-fungible tokens (NFTs) confer ownership of a unique digital item and are catching up to the total size of the global fine art market. Even traditional art auction houses like Christie's and Sothebys have begun selling NFTs to get in on the hype.

4. DeFi's impact on capital markets is being felt

Decentralized Finance (DeFi) is a developing area at the intersection of blockchain, digital assets, and financial services. It has the potential to disintermediate finance through both familiar and new service arrangements and while still early in its maturation, it has implications for many service categories, including stablecoins, exchanges, credit, derivatives, insurance, and asset management, as well as auxiliary services such as wallets and oracles.

• In 2021, the DeFi ecosystem grew sevenfold on a year-on-year basis.
• A year ago, there was less than $10 billion locked into all smart contracts but according to data from DeBank and The Block, there is currently more than $75 billion locked into Ethereum-based smart contracts, with another $25 billion locked into other smart contract-enabled blockchains.
• The big unanswered question is this. Will it disrupt traditional finance, operate alongside traditional finance or integrate with traditional finance? It may well be a mixture of all three.

5. National CBDCs are proliferating

Most countries are recognising that it’s a case of if you’re not in, you’re out, when it comes to cryptocurrencies. Central Bank Digital Currencies (CBDCs) are the result – virtual money backed and issued by a central bank.

• As cryptocurrencies and stablecoins have become more popular, the world’s central banks have realized that they need to provide an alternative – or let the future of money pass them by.
• Whether it’s Nigeria’s e-Naira, or the Bahamas’ ‘Sand Dollar’ or China’s digital yuan, they are set to modernise the current monetary system and to contribute to bridging the gap with the unbanked.
• The fact that institutional involvement in CBDC is now so strong, with public stakeholders such as the Bank for International Settlements, the World Bank, the International Monetary Fund or the World Economic Forum, all active on the topic, shows that CBDCs are here to stay.
• Equally significant is this fact. The Atlantic Council now reports that 87 countries (representing over 90% of global GDP) are exploring a CBDC. Compare that to May 2020. Then only 35 countries were considering a CBDC…

What will 2023 hold? It’s hard to say given the speed of progress in the crypto universe. But one certainty is this: crypto is changing the world as we know it.