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Without a doubt, the year 2021 marked the transition of blockchain and crypto-assets from a fringe concept and nascent discourse to a mainstream concept and item that has entered the mainstream financial markets conversation. Having said that, and despite bitcoin’s and other cryptocurrencies’ meteoric increase in market value, there is still considerable uncertainty around the sector’s future.
Even while regulators and policymakers have made significant progress in understanding and managing crypto assets, there is still considerable misunderstanding. Predicting the future is always dicey, but it becomes much dicier when anticipating or predicting a field as fast-moving as blockchain and crypto-assets.
Cryptocurrency has been around for a while, but where is it going next? We look ahead to 2022 and beyond to see what the future of cryptocurrency holds.
The thirst for regulation
Let’s be clear about one thing; there is a very common notion that the cryptocurrency industry is resistant to regulations. That is completely untrue. In fact, it can be asserted that the industry wouldn’t last long with proper regulations in place that at the least safeguards investors. Meanwhile, the future economy doesn’t look that bright without disruptive technologies like blockchain. In all its essence, the only future that seems probable at this moment is where all these worlds collide and start to coexist in harmony.
As the crypto industry matures, more and more governments are becoming aware of this notion, and as such, it is safe to bet that regulations are coming. With what we have seen so far in 2021, in terms of the regulatory state of the crypto and blockchain industry, 2022 would definitely be a crucial year, especially with so many nations close to deploying their very own digital currencies.
Slow as governments tend to be to respond to technological developments, they haven’t missed the boat on crypto. While bitcoin investments can help them balance the decline from the recession, it’s merely the tip of the iceberg.
Some nations already have their own digital currencies—a similar idea to bitcoin but has the same value as its fiat equivalent. For instance:
- China, Digital Yuan
- Ecuador, Sistema de Dinero Electrónico
- Senegal, eCFA
- Tunisia, E-dinar
Meanwhile, El Salvador has adopted BTC as a legal tender.
We are likely to see more polities follow suit in the near future. But the big game-changers are coming from the application of the technology upon which cryptocurrencies are based. For instance, Sweden has implemented blockchain technology for its registries. This form of adoption allows government organizations and personnel to share papers, access them swiftly and securely. Their effectiveness might be greatly enhanced as a result of this move. Meanwhile, several Indian states have also started working on implementing blockchain across the public sector.
Without question, we are in the early phases of a growing role of crypto in governments throughout the world.
Stablecoins will fuel adoption
Yes! Whether members of the cryptocurrency community like it or not, for anything to act as a means of exchange, it must be able to retain its value. The cryptocurrency market is still in its nascent stages, and the market remains highly volatile. However, a plethora of stable coins already exists, with the much-demanded stability that the mainstream users ache for. Hence, it can be safely deduced that stablecoins will play a major role in diverting the people’s mindset that cryptocurrencies are primarily speculative assets.
According to the President’s Working Group report, there has been a 500% growth in the use of stablecoins between October 2020 and October 2021. The key benefit and draw of stablecoins is the – predictably – stability that many of these crypto-assets offer, enabling crypto to be utilized as a transactional medium rather than a speculative investment.
As the calendar turns to 2022 and geopolitics continues to impact and partially guide the crypto asset debate, the emergence of stablecoins is a trend that cannot be ignored. Stablecoins and other crypto assets related to external assets seem to represent the next iteration of mainstream crypto acceptance.
Usability is going to the moon irrespective of the prices
Litecoin, launched in 2011, was the first Bitcoin rival to aim for speed. After 10 years, Ethereum 2.0 promises 100,000 transactions per second. Efforts to improve speed and security will continue as technology advances. But this is far from the only improvement in efficiency.
For instance, making bitcoin mining less resource-intensive was a hot topic in 2021. With Bitcoin mining exceeding 130 TWh per year, environmentalists and ESG investors are pushing for more cryptocurrencies with greener alternatives like proof-of-stake. This has encouraged the development of new technologies and approaches that are far more efficient and use much less energy.
Crypto payments are also here to stay. With big companies like PayPal, Visa, and Mastercard adopting crypto-assets payments in 2021, the trend seems more of a next step in the financial revolution. From decentralized finance (DeFi) to NFTs, the technology that underpins current market characteristics and applications has repeatedly shown itself effectively.
The technology is functional, and its uses are just now being recognized by the general public and non-expert markets. Stablecoins, if managed as marketed, offer a clear and somewhat steady (no pun intended) option for people and institutions to enter into the industry. Even if stablecoins aren’t the preferred cryptocurrency of some in the cryptocurrency industry, they will play an important role in the ecosystem’s future.
Investing for amateurs to professionals alike
One of the basic elements of investing that is altering is accessibility. There was just too much to understand for the typical investor to get committed early on. Hardware wallets and unknown exchanges created too many question marks.
Thanks to a slew of new services, applications, and software, investing in cryptocurrencies has never been simpler. Between expanding crypto awareness and user-friendly software, crypto is primed to become one of the most accessible assets.
As well, we are likely to see innovative tools of earning passive income with bitcoin assets develop. There are several ways of making money in the crypto space right now, but we’re hoping that there will be even more high-yield options available in the near future.
India is a great example of how investing is slowly becoming the new niche for the millennials and Gen Z alike. According to broker discovery and comparison portal BrokerChooser, India currently has more than 10 crore cryptocurrency holders. The trend is only expected to grow bigger from here on.
While 2021 was the year when blockchain and crypto-assets became a hot subject, it appears that regulations and norms will finally catch up to market realities in this year to come. No one can say for sure how blockchain and crypto assets will develop, but one thing is certain: they’ve gone mainstream. Whatever happens to the prices of individual tokens or coins, it is evident that the knowledge and acceptance of crypto assets are poised to accelerate in the next few years. Individuals, investors, and company owners would be well-versed in monitoring this sector as the calendar year 2022 approaches.Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.