Cryptocurrencies have become quite mainstream in recent years. Demian Voorhagen (CEO DemaTrading) and Dina-Perla Portnaar (The Integrity Talks) share nine trends that will play a major role in 2022 in the rapidly changing crypto world.
Trend 1: In-depth knowledge and portfolio index bots
The pursuit of wealth has brought many people to the crypto world. A world where automation, algorithmic trading and automated portfolio restructuring all exist to ensure an appropriate risk profile. But in-depth knowledge is needed to make the right choices.
Cryptoland is increasingly becoming a stock market or comparable to the S & P500 and S & P10. In fact, 80% to 90% currently go to portfolio index bots.
Fund indices are becoming a thing. People get a preference for certain coins, for example sustainable coins enproof-of-stake instead of proof-of-work. Categories can vary by division or industry, just like regular markets. Think of categories like Top 10 Coins, Top 20, Top 30, DeFi, Oracles, Metaverse, Made to earn and Layer 2. Each investor can make their own choice.
Trend 2: Crypto 3.0
According to Chainalysis’s Global Crypto Adoption Index, global adoption of cryptocurrencies has increased by staggering numbers by 2021. The fastest adoption rate can be found in emerging markets. This is due in part to the economies of scale of Crypto 3.0, which lowers transaction costs. In short, crypto has become a cheap, secure and fast way to trade money across borders.
Crypto 3.0 emphasizes scalability, sustainability, control, and blockchain interoperability. Criticism of Crypto 1.0 and 2.0 regarding scalability and environmental sustainability has decreased somewhat with Crypto 3.0, as environmental sustainability has increased by 99.99% and transaction scalability by almost 100 times.
Newer blockchains use much less energy and can process more transactions per second than the old models.
Trend 3: Crypto fades the value of gold
Meanwhile, more and more established companies are accepting cryptocurrencies. And more and more countries are using it as a legal tender. For example, El Salvador accepted Bitcoin in September 2021. Fintech companies such as PayPal and Square offer users the opportunity to buy various cryptocurrencies on their platforms and make direct investments in crypto.
Square bought Bitcoin for about $ 170 million in 2021, on top of the $ 240 million the company already had. Tesla continues to go back and forth in accepting Bitcoin payments, despite owning $ 2.6 billion in cryptocurrencies.
The overall market value of crypto has reached a record high of $ 2.6 trillion in the fourth quarter of 2021. The value has now declined, but the long-term outlook remains positive.
Meanwhile, about $ 200 billion worth of cryptocurrencies change hands every day. That number is rising. That means it is likely to surpass the $ 225 billion worth of S & P500 shares traded each day. Possibly later in 2022.
Trend 4: Cryptoization of new markets
There is also talk of crypto-emerging markets. This growth has been particularly rapid due to the recent scaling of Crypto 3.0, which has reduced transaction costs. Crypto has become a cheap, secure and fast way to send money across borders.
Digital assets such as stablecoins, which are usually pegged to the US dollar, help protect savings against high inflation and fluctuations in local currencies. Nine out of ten countries have the highest cryptocurrency adoption, so the percentage of people who own crypto is in new markets.
Much of Central Europe and the Middle East have surprisingly little cryptocurrency. A large part of America, Eastern Europe and Asia / Pacific owns the most.
Trend 5: Energy as a judge to secure blockchains
The main criticisms of Crypto 1.0 and 2.0 are its scalability and environmental sustainability. Bitcoin and Ethereum’s proof-of-work blockchains are enormously energy-intensive, as they deliberately have to solve difficult mathematical puzzles to validate transactions and reach consensus. Energy acts as a judge to secure these blockchains.
Bitcoin currently uses more energy than Sweden – a full 184 Terawatt hours – each year and processes five transactions per second. By comparison, Visa handles about 1,700 transactions per second. Ethereum is more efficient and requires 84 TWh of energy to process 30 transactions per second. Cardano, a Crypto 3.0 blockchain, uses only 0.006 TWh of energy and processes 250 transactions per second.
Trend 6: Ethereum takes over from Bitcoin
Bitcoin’s market value has fallen from 73% in early 2021 to the current level of 44%. Ethereum has almost doubled its market share, from 11% to 19%. Six of the top ten cryptocurrencies are built on top of the Ethereum blockchain
Ethereum 2.0 is expected soon. The prediction is that Ethereum will take over from Bitcoin in 2023, also known as flipping.
Trend 7: DAO and DeFi
A decentralized autonomous organization (DAO) is a decentralized corporate governance structure around a cryptocurrency, where ownership of a certain number of tokens or NFTs provides access to the organization and forms the basis of an active voting system. This ownership-based democracy allows a DAO to rally behind its own initiatives and decide how organizational resources are used.
DAO tokens are similar to traditional listed stocks. The interests of investors are aligned with the success of the organization. The top 20 DAOs have $ 6 billion in digital assets. These include decentralized financing projects (DeFi) such as Compound (loans), Uniswap (decentralized exchanges), Bankless (banking) and public financing units such as Gitcoin, which pay users to contribute to open source software such as the programming language Python.
Decentralized Finance (DeFi) aims to replace traditional financial services. DeFi is a budding ecosystem of financial applications that uses smart contracts to trade without intermediaries. The industry has grown from $ 28 billion to $ 101 billion by 2021. Explosive growth is ahead.
Trend 8: DEX and transparency
The two most dominant areas in DeFi are decentralized exchanges (DEX), aka the future of trading and decentralized banking and borrowing. Together, they are responsible for 80% of the sector.
With DEX, there is a reliable, non-custodial, transparent and peer-to-peer settlement process using smart blockchain contacts. However, centralized exchanges act as depots for their clients. Most trades are performed outside the chain. There is little transparency.
The largest DEX is Uniswap, which is built on the Ethereum blockchain. It has an average daily trading volume of $ 2.6 billion, which has increased> 50% since its launch in November 2018.
Decentralized banking and lending is an alternative financial ecosystem where consumers transfer, trade, borrow and lend cryptocurrencies, theoretically independent of traditional financial institutions and the regulatory structures built around traditional banking.
It has enabled millions of people around the world who do not have access to regular banks or financial services to use financial services. Maker, Aave and InstaDApp are the largest lending platforms with $ 42 billion under their management.
Trend 9: NFTs and royalty tokens
Non-fungible tokens (NFTs) are digital assets with a distinctive character, usually in the form of digital works of art. NFTs can be bought and sold like any other property stored on the Ethereum blockchain. The digital tokens can be seen as proof of ownership.
The top prize for an NFT was won by Beeple’s Everydays at Christie’s. In March 2021, it raised $ 69 million. OpenSea remains the largest marketplace for NFTs to date, with more than 600,000 active users growing at> 25% per month.
Royality tokens are crypto tokens intended to represent a form of digital equity. Just as traditional stocks represent equity in a company, tokens can be used to represent a personality’s ownership on social media and society. The token is built on top of the Ethereum blockchain (aka an ERC20 token) and is often traded on a decentralized exchange such as Uniswap.
For example, royalty tokens offer artists, musicians, writers, social media influencers and sports professionals a new way to make money. Celebrities are often huge sources of income for media companies, but they are often not adequately rewarded for their efforts. Tokens reward creators directly for their work and can fundamentally disrupt existing and outdated media models.