Crypto Predictions 2022: Where Should You Invest?
After another exciting year that has seen some incredible growth in cryptocurrency as well as some big volatility, investors are wondering what the future might hold in 2022. Amidst all the ups and downs that come with explosive growth, one thing has become evident: Cryptocurrency is no passing fad as predicted by some doomsayers when it was in its infancy. It’s here to stay, and it’s set to change the way we do business and manage finance.
We’ll take a look at how you can get your slice of the pie this year, but first, a quick recap on some of the highs and lows of 2021.
Crypto market recap
- Bitcoin remains the cryptocurrency of choice among US investors, boasting 80% of crypto investments. Globally, it retains 66% of the market cap.
- At the time of writing, the global market cap for all crypto assets was $2.2 trillion
- Industry leaders predict the growth between March 2021 and February 2022 to be 1800%
- Ethereum’s daily transactions were almost four times higher than Bitcoin’s during 2021
- $3 billion was lost in 2021 to hacking, thefts, fraud, and scams
- Bitcoin mining consumes vast amounts of power, enough to power more than 10 million homes per year
- The ten cryptocurrencies with the highest market cap make up around 88% of the total market cap
Who invests in cryptocurrency?
This is an interesting question because investors’ demographics vary widely around the world. Males are by far the largest group of investors, with more than 80% of the demographic share.
Nigerians are the largest group by country, with 31% of people saying they hold digital assets. Vietnam, the Philippines and South Africa are next, with research suggesting that cryptocurrency is popular in emerging markets with an unstable or weak currency, or where levels of trust in the government are low.
Latin Americans are also interested in crypto investments, with El Salvador becoming the first country to accept cryptocurrency as legal tender. Latin America also holds the dubious title of being the largest recipient of the proceeds of crypto crime.
In the US, 66% of investors have not invested in cryptocurrency and do not intend to in the future, while 18% of US investors say they haven’t heard of it.
What should crypto investors expect in the coming months?
2021 was such a huge year in the crypto world that statistically, we should not expect to see such big numbers in 2022. Cryptocurrency has long been characterized by its boom-and-bust cycles, especially as new investors get excited, take a hit, retreat to regroup, then dive in again, armed with their newfound knowledge.
Fads that will fade
Industry leaders are expecting that fads such as meme coins will fade into obscurity, along with anything promoted by influencers such as Elon Musk. Many coins show promise initially, but the failure rate is high, and it pays to remember that despite its rising acceptance with mainstream financial markets, crypto is still a high-risk investment.
That said, meme coins may surprise us and continue to perform well. The golden rule to remember about digital assets is that they are notoriously difficult to predict and often come up with surprises. The safest strategy (unless you like to live dangerously) is to avoid the fads that are fed by narratives and concentrate on the fundamentals to build a solid long-term position.
Gaming will grow
Gaming and the metaverse are making waves, with play-to-earn games at the forefront of a surge in crypto gaming. Many players are quietly raking in the rewards, so this is a space to watch. As the learning curve is relatively gentle, gaming is seen by many newcomers as a gateway to the crypto space, with diehard gaming fans and new investors alike flocking to take advantage of the crypto gaming industry while it’s in its infancy. Market valuation data suggests that gaming will be one of the hottest trends for 2022.
There will be more government regulation
Defi in particular will face increased scrutiny and regulation by governments. China banned cryptocurrency altogether (apart from its government owned and backed digital yuan), while El Salvador took the opposite approach and made Bitcoin and Ethereum legal tender, proving that governments can no longer afford to ignore cryptocurrency.
Indeed, many governments are intending to introduce govcoins, central bank digital currencies (CBDCs) such as a digital dollar that are backed by central banks and governments. This of course means more government oversight, with the Securities and Exchange Commission likely to take a more active role. At the same time, institutional investors are taking more interest in cryptocurrency as another asset class rather than a fad that will fade away, so expect to see more big names becoming involved over the coming year.
There will be growth through the stock market
For many newcomers to crypto, trading digital currency on various crypto exchanges is way out of their comfort zone. At the same time, they want a slice of the pie. After all, they’ve seen others make good returns.
For these people, trading cryptocurrency on the stock market is a good starting point, especially if they are already familiar with trading fiat currency or assets. As cryptocurrency gains greater market exposure and acceptance, we can expect to see it playing more of a prominent role in the stock market.
Top five digital currencies for 2022: Our picks*
*Not financial advice
At Dexfolio, we are traders too. While we have been busy building an industry-leading app to help you manage your portfolio, we have also been doing our share of investing in and navigating the crypto industry. Like most investors, we’ve got our hands dirty, had some wins and losses, and learned a whole lot more about decentralized finance in the process.
So, just for fun, we thought we would share our insight into the cryptocurrency space and the digital currencies we believe will experience good growth in 2022.
The launch of Ethereum 2.0 is a complex process taking place over time, but its main goals are to address the limitations currently hampering the growth of the Ethereum ecosystem. This includes increasing the capacity and speed of transactions, the introduction of a staking system to make it more resource-friendly, and measures to make transactions on the Ethereum blockchain more secure.
The upgrade is expected to last at least into the first half of 2022, and once complete, will make Ethereum very attractive to many investors, especially those who would like to invest but have been deterred by the limitations these changes are seeking to address.
Despite a slowing of crypto returns in the final months of 2021, Solana powered ahead to finish the year on a massive high, boasting returns of more than 12 000% for the past year. With a fast blockchain that can process 65 000 transactions per second and low fees, it is highly appealing to developers and investors alike. It currently has more than 400 projects underway and is home to a large NFT marketplace as well as plenty of defi apps.
With the metaverse set to explode into the crypto world, market data shows that Axie Infinity is poised to ride the wave. Investors are seemingly obsessed with the potential of blockchain-based virtual worlds, and Axie is delivering with a play-to-earn game that has experienced some impressive growth over the past few months. In contrast to traditional games, players own the NFTs they create, giving rise to opportunities for monetization. Given the growing popularity of crypto gaming, Axie Infinity is one to watch.
Avalanche has great potential for growth this year because it offers some appealing features such as high speed. Able to process 4500 transactions per second (TPS), it is far beyond what the popular blockchains can offer. For comparison, Ethereum is currently able to process 13 transactions per second while Bitcoin can manage seven.
But even its speed isn’t the main attraction. Avalanche has the Ethereum Virtual Machine operating on its blockchain, making it a magnet for developers. With the dApp makers able to avoid the high fees, congestion, and processing lag of the Ethereum chain, Avalanche is a very attractive proposition and it is likely to experience good growth in 2021.
As the second-largest DEX in terms of Total Value Locked (TVL), Uniswap is worth watching because it offers tokenized assets (a large list of them), liquidity pools where investors can pool their assets in a smart contract and earn transaction fees, and some big names are starting to take notice, offering the exchange some credible exposure.
Global business predictions for 2022 suggest that as centralized finance struggles with regulation, investors will increasingly turn to well-established DEXes such as Uniswap to avoid the problems brought about by government oversight. Market participants are already jumping ship to take advantage of the benefits offered by DEXes.
A word on Bitcoin
While some experts are predicting a Bitcoin crash in 2022, others believe a more modest correction is in order. However, everyone agrees that Bitcoin is here to stay even though the BTC price may fluctuate.
That said, El Salvador’s move to embrace Bitcoin as legal tender is a huge boost for the coin, and other countries have been paying attention. It is likely that we will see some of them follow El Salvador’s lead and adopt Bitcoin as a currency. Opinion is divided on what will happen to Bitcoin in the coming year, with some experts suggesting it will fall into the doldrums while others are predicting great things. Either way, it’s here to stay.
Are ZK Rollups the next big thing?
Zero Knowledge Rollups offer Layer 2 scalability to the Ethereum network by operating smart contracts that process large bundles of transactions off the chain as a single transaction, then sending back its own form of validation known as a SNARK. The Ethereum network has a variety of defi protocols such as this to counteract the slow processing times and high fees on its chain.
Platforms operating ZK Rollups protocols do not have many native coins, but the ones to watch are Loopring, zkSync, and Immutable X, a Layer 2 scaling solution for Ethereum-based NFTs.
Why Decentralized Autonomous Organizations (DAOs) will play a big role in 2022
The beauty of DAOs is that they are owned and operated by the stakeholders. Everyone has the opportunity to participate in decision making and that’s appealing to a lot of people. As awareness grows of what it means to participate in a DAO, people will better understand the value and benefits of this type of structure. We believe we will see significant growth in this space this year as DAOs start to mature and come of age.
Dexfolio has you covered for 2022
Dexfolio has plans for 2022 as well. Our industry-leading portfolio tracker continues to make portfolio management easy while we continue our rollout of useful tools and features. We will continue to consult closely with our community while keeping abreast of industry trends to ensure that we are continually at the forefront of the technology that drives the defi space.
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