2021 has been a very positive year for cryptocurrencies. We have seen Bitcoin reaching multiple all-time highs and a market that behaved very positively. Many altcoins reached new highs while others were able to become a top 10 cryptocurrencies.
Volatility remained and attacks from traditional finance continued. However, we have also seen that there are many important milestones for digital assets. El Salvador was the first country to make Bitcoin legal tender. Moreover, several companies purchased Bitcoin and added it to their balance sheets.
But what to expect from cryptocurrencies in 2022? This year could be full of new and interesting things in terms of developments but also when it comes to price action. It might be time to see digital currencies stabilizing after a bull trend in 2021 and understand which are going to be the next projects in the crypto space to offer valuable solutions to crypto investors.
We are not financial advisors and this should not be considered financial advice. All the information shared should be considered for educational purposes only.
What to Expect from Cryptocurrencies in 2022?
What to expect from cryptocurrencies in 2022? This is a very good question that will require understanding the whole cryptocurrency market, its processes and behaviour. We will make a summary of what we believe could happen with Bitcoin, IDOs, Exchange Currencies and Blockchain-based games. Remember that this is just for educational purposes only.
We have seen many different projects expand in recent years and different industries inside the crypto market have also been expanding at very fast rates in recent years. Therefore, we could see new changes and solutions being released to the market. Understanding these things would let us have a clear idea of what to expect from cryptocurrencies in 2022 and even further.
We will focus on different market sectors, cryptocurrencies and trends. This would help us have a clear idea of what could happen with these trends in the coming months.
Let’s start with Bitcoin, the largest cryptocurrency in the world. As we have seen in 2021, Bitcoin could be a very demanded asset in 2022. That means that the virtual currency could be purchased by many other companies and other countries could make it legal tender.
As we know, the Bitcoin price is very volatile, so we could expect everything from it. It can go higher or it could lose part of its price. The important thing is to understand whether it would be adopted by investors or not.
Another thing to talk about is that Bitcoin could reinforce its status as a store of value. With emerging markets being hit by central banks’ decision to print large amounts of money during COVID-19 times, Bitcoin could start to absorb this excess of money in the economy.
Bitcoin is definitely the asset to be looking at. After the incredible year that it experienced in 2021 and the current war between Ukraine and Russia, Bitcoin could play a key role in the future of the economy. We could see Bitcoin being adopted as an alternative currency to price oil markets and energy. This could bring lots of funds to Bitcoin and it could push its price even higher in the coming years. Therefore, following what could happen with Bitcoin is definitely key.
Learning from the recent experience of El Salvador adopting Bitcoin we could see other countries doing so, even though it might be difficult during a period of war. Markets are currently experiencing turbulent times and supply chain issues are affecting the whole of international commerce.
Due to these reasons, it would be strictly necessary for investors to pay close attention to how Bitcoin will evolve throughout 2022. As of April, Bitcoin has been traded sideways in a range between $36,500 and $47,500. Bitcoin can of course reach an even larger price and a record. However, this would be highly dependent on many things, including countries adopting Bitcoin or more money flowing into BTC in the coming months.
Another thing that is worth taking into consideration is the fact that there could be new companies investing in Bitcoin. We had MicroStrategy, Tesla and MassMutual purchasing Bitcoin. Therefore, things could become even better in the future as many other firms enter the crypto industry.
Ethereum (ETH), Litecoin (LTC) and Other Cryptocurrencies
Talking about Ethereum (ETH), we see that this virtual currency should continue to attract investors as it is moving from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus algorithm. There are many things to take into consideration about Ethereum and whether the transition will be smooth and on time.
This is something that should be discussed by the Ethereum community and investors should pay close attention to it. Despite that, we see that ETH’s price has performed better than Bitcoin in recent months. This could also be related to the fact that Ethereum has been reducing its supply in recent months rather than increasing it.
Nonetheless, Ethereum has to solve the issues that it is currently facing with its fees. Fees are very high on its network and any type of economic activity becomes quite difficult for users that want to move funds or perform transactions. Therefore, the ETH community should also focus on these issues in the coming months (2022).
Litecoin, instead, has already become more private and fungible. The long-awaited network improvement is currently live and it is helping LTC holders send and receive transactions without sharing private information with the market. This makes Litecoin the largest privacy cryptocurrency in the market right now, even larger than Monero (XMR).
Therefore, Litecoin could continue to grow in the coming months as the virtual currency could be adopted by a larger number of investors. We could see new inflows of money to Litecoin in 2022 as the coin becomes adopted by users that want to protect their privacy when sending and receiving transactions.
But another thing is also worth mentioning. Litecoin has been struggling to grow compared to other virtual currencies. Despite the fact that Litecoin has a limited supply and that it is one of the oldest virtual currencies in the market, it fell from being one of the top 5 cryptocurrencies to becoming one of the top 30th largest. This is something that the Litecoin community has to evaluate and try solving in 2022.
Other virtual currencies have also been expanding in recent months. We are talking about coins such as Solana (SOL), Terra (LUNA), Polkadot (DOT), Avalanche (AVAX) and many others. All these projects seem to be here to stay and to offer unique and different solutions to the crypto industry.
Having a look at these coins and analyzing which could be new releases in the market in 2022 would be definitely important to understand what could happen with digital assets this year. There have also been some coins that decoupled from the crypto market moving lower. This is definitely positive for those investors that want to create a reliable and diversified portfolio and make some profits with digital currencies.
By combining traditional with new crypto assets, investors would be able to find a balance between risk and rewards in 2022. As always, it is very important to pay close attention to what happens with macro events, including interest rates moving higher, inflation and also the war in Ukraine. That being said, there are many possibilities in the cryptocurrency market for 2022 that should be used by investors.
IDOs and Decentralized Finance (DeFi)
Initial Decentralized Offerings could become the new standard to get early access to virtual currencies. IDOs could continue to expand around the world with investors getting the possibility to buy some of the latest virtual currencies to be released to the market.
Participating in IDOs and also IEOs could be a great way for investors to get early access to potentially profitable digital currencies. Although the coins might not be all profitable, it could be a good way to have exposure to possible disruptive virtual currencies. If the market continues its bull run, we might see some new and profitable cryptocurrencies being released through these fundraising methods.
Despite the positive reviews that IDOs had in 2021, we might not see so many IDOs in 2022. This is because DeFi platforms have been slowing down in recent months. Indeed, since November 2021, the total value locked in DeFi platforms has dropped by close to 25% according to data shared by DeFi Pulse. This shows that it is becoming difficult for these projects to attract new capital.
Indeed, we see that DeFi platforms could have received a large inflow of money like Bitcoin and other virtual currencies were reaching all-time highs at that time. This happened exactly after the first highs reached by cryptocurrencies in early 2021. However, starting in November, the market moved lower and continued its trend downwards.
Despite that, the Decentralized Finance market is a very promising one. Indeed, there could be new and innovative solutions being released on a regular basis and on different blockchain networks. The positive things about DeFi platforms are related to the fact that they are allowing investors to get access to financial solutions without having to be worried about centralization or financial control from third parties.
Exchange Virtual Currencies
With the expansion of IDOs and IEOs we should also take into consideration that exchange currencies could become key players in the cryptocurrency space. Most IDO and IEO platforms require users to purchase the virtual currency of the platform through which new tokens are launched.
This is why it is very important to closely follow the price evolution of these coins. If IEOs and IDOs continue to attract new users, then exchange currencies could certainly follow this trend. There are many crypto exchanges that are currently offering IEOs and IDOs. Having a balanced portfolio and adding exchange currencies to it could be a good idea.
Nonetheless, this strategy might not work during a bear market. In bear markets, IEOs and IDOs tend to have a lower impact in the community. Thus, it is important to understand the direction of the market.
Exchange currencies have been moving higher in 2021 exactly due to the things mentioned in the previous paragraphs. But will these conditions remain in 2022? It is highly doubtful to see a bull market linked to exchange currencies in the near future, unless market conditions change for the better.
This market sector (the one linked to exchange currencies) is simply one of the many financial industries inside the crypto market. Therefore, we can apply this analysis to other currencies and sectors in the crypto market. The question is whether we are able to recognize these trends and industries.
Blockchain-based games became a market hit. They are now among the most innovative projects in the cryptocurrency and blockchain industries. Basically, we are talking about games that run on top of blockchain technology and let users earn rewards and tokens while playing. These types of games are known as Play to Earn (P2E) games.
One of the most popular blockchain-based games is Axie Infinity, where users can purchase Axies and enjoy new and unique adventures. By performing challenges and playing with other players, Axie Infinity is among the best platforms for users to earn while playing.
Although Axie Infinity is the most popular blockchain-based game, there are many other alternatives right now in the market. If the trend continues for virtual currencies these tokens could become very profitable. Nonetheless, these are very new value proposals in the crypto market. That means that there is still a high risk connected to these types of investments
Blockchain-based games seem to have lost the steam that they had in 2021. Therefore, they are basically following the general trend of the market (i.e. downwards). In 2022, other virtual currencies seem to be performing better, including Bitcoin, which could be adopted by different companies and countries.
In the future, Blockchain-based games could continue to grow and expand. Their market proposal is unique and has been a great option for people to get access to stable earnings. If market conditions change, then there could be a good moment in which the market will turn bullish for these projects once again.