But the general market for crypto assets will also grow. Since the beginning of 2021, the dollar prices of the 20 largest cryptocurrencies listed on CoinMarketCap by market capitalization have increased by triple digits. Cryptocurrencies native to alternative Layer 1 blockchain protocols vying for Ethereum’s spot stand out: Solana, Binance Smart Chain, Cardano, Polkadot, Avalanche are among the top 20.
Of course, investments in the crypto asset market are riskier than traditional investment opportunities, in part due to higher price volatility. However, it is fair to compare the price performance of cryptocurrencies with the market indices known as. For example, the MSCI World Index is only 17% higher than it was in early 2021, and the gold price trend is currently negative.
2. Ethereum upgrades and remains the dominant smart contract platform
Ethereum is expected to complete the transition to the proof-of-stake consensus mechanism this year. Financial institutions in the TradFi sector are also likely to enter the staking business. Staking rewards could become a kind of “prime rate” of the crypto asset market, as it is rarely possible to invest in this market in a more risk-free way than through ETH staking. Here, one has the option of setting up their own staking infrastructure or turning to staking services like Coinbase or Blockdaemon, for example. Ethereum continues to maintain the highest number of transactions despite the rebound of other altcoins that compete in the market.
3. Cryptocurrency investments become more sustainable
ETP issuers, cryptocurrency exchanges, mining companies, and financial institutions are interested in offering green products and services to their customers. To date, many potential crypto investors have been reluctant to invest in Bitcoins due to the relatively high carbon footprint of Bitcoin mining. Interested companies are also often bound by ESG rules that they must follow.
In general, the energy mix used for grid operations blockchain it is becoming increasingly green. Mining companies are increasingly turning to renewable energy sources, such as geothermal or solar, due to the cost structures that such energy sources offer.
4. Web3 infrastructure paves the way for Internet decentralization
Web3 represents a novel approach to potentially deliver Internet architecture in a decentralized and autonomous manner using blockchain technology. In essence, it is about reducing dependency on “big tech” networks and IT service providers, such as cloud or internet providers.
Web3, on the other hand, is based on the idea of returning control of data and infrastructure to Internet users. From decentralized data storage through blockchains like Arweave or Filecoin, decentralized wireless networks like the Helium network, tokenized platforms and projects where all decisions are made by the community, to completely new forms of identity management: Web3 offers a wide range of possibilities. Cryptocurrencies are particularly important in this context because they can provide a sustainable incentive system that encourages network users to provide the necessary infrastructure in the long term.
5. NFTs and blockchain-based games become a source of income
The Metaverse is a virtual platform where people can collaborate and trade economically. These digital economies are hard to imagine without NFTs and blockchain-based infrastructures.
Microsoft and Facebook have announced that they are shaping their own approaches to digital worlds, ie “metaverses”. It can be assumed that these Internet giants will develop a largely centralized and partially closed system, making value transfers to other digital ecosystems more difficult or even impossible. However, this is diametrically opposed to the philosophy of Web3, which focuses on individuals with clearly defined property rights and freedom of action with the help of blockchain technologies.
6. Emergence of a multi-chain world
The prevailing view is that we will live in a multi-chain world where multiple blockchains can transfer information and value to each other. Therefore, we will see the ratio between the TVL on Ethereum and the TVL of all blockchains steadily decrease. A year ago, this was 90%. Today, it is only 62%. However, it is foreseeable that Bitcoin will remain the number 1 blockchain and Ethereum the number 2 blockchain in 2022.
In addition, interoperability between different blockchain ecosystems through bridging and cross-chain protocols is also being diligently worked on. Last but not least, with Polkadot and Cosmos Inter-Blockchain Communication Protocol (IBC), there are efforts to establish a kind of Layer-0, which is a network of different blockchains capable of communicating with each other.
7. More legal clarity through regulation and prohibitions
In 2022, many countries are expected to make a statement on how they will handle crypto assets. Whether they will tighten restrictions and introduce bans, like China, or take a crypto-friendly approach as seen in El Salvador, which adopted Bitcoin as its official currency alongside the US dollar in September 2021. Regulators will focus on issues like AML, KYC, tax, and stablecoins, and will explore the feasibility of DeFi regulation on exchanges with regulators from other jurisdictions.
8. The digital euro will no longer exist as a stable currency on a large scale
In theory, the digital euro can exist as a central bank digital currency (CBDC), as a trigger solution, or as a stablecoin. However, the European Central Bank (ECB) is not expected to issue a CBDC until 2026 at the earliest. CBDCs already exist in smaller countries like the Bahamas or Nigeria. The digital euro in the form of a stable currency will continue to exist only as pilot projects in 2022.
9. Adoption by institutional investors and large corporations is progressing
Institutional investors and large companies have also made their interest in digital assets known over the last year. These include hedge funds, asset managers and family offices, but also pension funds or institutions such as Sparkasse or Raiffeisen-Volksbank. In the wake of above-average inflation rates, a persistently low interest rate environment, more fields of application and the consequent increase in demand, major banks such as JP Morgan or Goldman Sachs are beginning to develop a range of offerings. around investments in cryptocurrencies. Tech companies like Microstrategy and Tesla hold billions of dollars in Bitcoin to combat the expansion of the money supply, which has already caused relatively high inflation over the past year.
10. DAOs open new avenues of social and economic coordination
Decentralized Autonomous Organizations (DAOs) are blockchain-based decentralized organizations that are collectively owned and managed by their members according to predefined rules through tokenized voting. These create exciting use cases, such as crowdfunding, social clubs, human resources, or collective investment projects. According to Consensys, there is $14 billion in the treasuries of the top 20 DAOs, trending upwards.