Crypto Adoption and Regulation: My Crypto Outlook for 2022

Crypto Adoption and Regulation: My Crypto Outlook for 2022

By Marcusblue | Musings About Crypto | 26 Jan 2022


As I am typing away on my laptop for this interesting BitYard writing contest, it was just a few days after the crypto crash of January 22, 2022. This crypto crash was said to have erased more than $1 Trillion in market value and more than 239,000 trader positions were closed, liquidating around $874 Million.

For Bitcoin, the largest digital asset, this crash was just one of many since its November All Time High (ATH). Since then, Bitcoin has declined in value. This is true for the altcoins as well. The long string of dips were said to be caused by multiple events since late 2021, e.g., the upcoming regulation on crypto in most countries, countries weighing on a digital currency, and environmental issues surrounding the Proof of Work (PoW), with the most recent threat of ban on crypto in Russia because of this.

What a way to start the year 2022! With these in mind, I am sharing my crypto outlook for 2022.

Mainstream Adoption of Crypto Projects to Continue
In 2022, there will be continuous adoption of blockchain-related technologies and solutions, such as blockchain gaming, NFTs, and metaverses. These will introduce the crypto market to the mainstream. More users mean more traffic (buyer or seller) and therefore, more trading activity. I therefore see this as bullish for the crypto market in 2022.

Blockchain games have been existing since 2017, but only started getting noticed in 2021 because of Axie Infinity's media exposure during Covid-19 pandemic (Image source here). The "Play to Earn" scheme of blockchain games attracts players who hopes to earn some profit through gaming. But since then, there have been mixed reactions, with criticisms received from players and developers in the gaming industry because of the limited appeal and plays of blockchain games compared to quality video games available in the market.  

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NFTs got noticed in 2020, but its phenomenal success was really because of controversial and high-profile sales and auctions of NFTs in early 2021. An example is artist Beeple's "Everydays: the First 5,000 Days", which was auctioned for US$69.3 Million (Image source here). Furthermore, the adoption of NFTs into the mainstream gained momentum in 2021 with large institutions entering the NFT space with their own digital art and NFT collections. This is expected to continue in 2022.

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The year 2021 also saw the rise of Metaverses and virtual lands and this will proceed through 2022 (Image source here). You can purchase virtual lands in the Moon or Mars if you want, where you can display your in-game creations or purchased NFTs or you can just play to earn. Large institutions also started entering the Metaverse space buying virtual lands.  and setting up virtual shops potentially to sell virtual versions of their commodities.

The Metaverse

Decentralized Finance (DeFi) will flourish in 2022 (Image source here). This is despite of potential crackdown of this space because of Anti-Money Laundering Act (AMLA) risks. You will be able to earn, borrow, lend, and stake without the need of an intermediary, e.g. banks. This will be the next battleground for Ethereum and the so-called ETH killers as the race to the top two spot (after Bitcoin) continues in 2022. 

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Fraud, Scams and Rug Pulls on the Rise
More developers are expected to set up their own blockchain game and NFT projects in 2022. The new investors of 2022 will look for new eggs to invest in and the crypto space will be an exciting space for them. However, the lack of proper oversight over the crypto space exposes these new investors and users to scams. But, users and players will still join these projects because of the promise of profit. As we see more users enter the crypto space, expect more scams and rug pulls in 2022 (Image source here). 

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For players, entry is as easy as opening up a passbook in a bank, but not as boring as investing in the stock market. Also, your potential profit is limited by your imagination. You can opt to roll the die (chance-based), play the game (skill-based), stake (staking), borrow or lend (borrowing and lending) for profit. 

For developers, it is very easy to create your own token on a blockchain and market it off as some "coin-to-rule-them-all" thing. I predict that the current number of coins (12,837 at time of post) in Coingecko will double in 2022. The pseudonymous nature of the crypto world and the lack of mandatory checks to protect investors were all called out by analysts and academics. As a result, this is one of the reasons that the crypto space is now being subjected to a regulatory lens.      

New Regulations for Crypto not Far-Fetched
Sooner than later, crypto will enter the mainstream, and we need to accept that regulations will follow suit (Image source here). Each country sees the crypto industry differently. Countries around the world have either banned or embraced crypto currency. There are countries that are considered "crypto-friendly", such as Switzerland, Germany, Singapore, Malta, Portugal, Slovenia, Bermuda and Belarus. El Salvador takes the cake when it embraced Bitcoin as a legal tender.

On the other hand, countries that banned cryptocurrency has imposed either a full ban or a limited ban (ban for payments, but allowed for trading or investment purposes). These countries include China, Egypt, Iraq, Qatar, Morocco, Algeria, Tunisia and Bangladesh, Bolivia, Nigeria, Turkey, and Indonesia (as haram).

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Governments have been going after the crypto industry in one form or another for some time. Some of the areas currently in the hot seat are:

  • Proof of Work (PoW) Mining because of environmental issues.
  • Stablecoins in general, as a potential threat to native currency.
  • Potential taxing of crypto developer, miner and validator (US Infrastructure Bill).
  • Decentralized Finance (DeFi) and crypto wallets because of potential risk for Anti Money Laundering Act (AMLA) fraud.

Will new regulations hamper the mainstream adoption of crypto industry? Yes and No. For sure, any regulatory requirement, e.g. taxation, will get a negative reaction from the user base, and may even cause a market or flash crash. But, I doubt it will stop the innovations around blockchain technology or restrict the mainstream adoption of blockchain gaming, NFTs, or the metaverse. Also, no one even knows what exactly are the regulations that will be set in place at this time. Although, I am expecting some form of Digital IDs or Identifiers or DIDs must be one of those.  

Hence, while I see this having an initial bearish impact in my outlook, in general, we should see the market improve eventually as more users establish trust with the crypto space and mainstream adoption progresses. 

No Decoupling of Altcoins from Bitcoin on the Horizon
Last year 2021 was when we saw ETH exponentially rise more than BTC that some thought ETH will soon flip BTC (Image source here). The supposed reason behind this was the growth of gaming, NFTs, metaverse and DeFi. We thought we were starting to see the difference between a utility coin (e.g. Ethereum) and a store-of-value coin (i.e. Bitcoin). Unfortunately, the recent crash contradicted this. 

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If Bitcoin dips down or rises up, altcoins will follow. It appears that outperforming Bitcoin does not directly equate to decoupling. Hence, there will be continuous dependency of altcoins on Bitcoin in 2022. If you are a trader, ensure you monitor Bitcoin price movement as your altcoins will attempt to align itself accordingly with Bitcoin each time.  

The Trending Altcoins in 2022
Sure, there will be new and flashy coins and tokens that will grab the headlines in 2022. Good or bad, I believe there will be a lot of chatter as well as expectations for Ethereum in 2022.

For one, because of the rave around blockchain gaming, NFT, Metaverse and Decentralized Finance (DeFi), the news will always include one other coin - Ethereum, regardless of what L1 blockchain is involved. This will further generate interest in Ethereum. 

Second, the year 2022 is when the most important upgrade in ETH will happen. That is, the ETH 2.0 or Consensus Layer (as recently renamed). This is targeted to be deployed by June 2022 (Image source here). This has been a long journey since 2020 with the creation of a separate ETH network called Beacon Chain to establish ETH as a Proof of Stake (PoS) blockchain. The next step is the Consensus Layer deployment before eventually going to the Proof of Stake "Merge", wherein the ETH Proof of Work blockchain will merge with the Beacon Chain.

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Third, after the merge, the locked up ETH that is released will be limited so there will be no flooding of ETH in the market (see chart below for Total Value Staked (TVS) for ETH 2.0). Then, moving forward, we will see more ETH that will be staked, but less ETH created. The less ETH in the market, the better. Overall, my expectation is that this will push the price of ETH in an upward trend.  

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Fourth, I love a good bloodbath. This is better than Star Wars Jedi versus Sith plays! There are a lot of contenders against ETH gearing for the top spot (utility-wise). These so-called ETH killers and ETH-killer killers round up my gang. What do I mean by this? I have $ETH, but I also have $LUNA, $SOL, $AVAX and $MATIC bags to hedge against ETH in case it fails in its promises. 

ETH Killers: Unfortunately, expected big improvements in scaling will not be in effect immediately after the "Merge". Scaling improvements via shard chains will only be available by 2023. Hence, there is still a chance for other L1 blockchains to steal the thunder from ETH. The so-called "ETH killers", such as Terra ($LUNA), Fantom ($FTM), Solana ($SOL), and Avalanche ($AVAX) are in the prowl to take over the second place from ETH.

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ETH-Killer Killers: There are ETH Layer 2 systems providing an alternative option for Dapps in terms of transaction speed and capacity. Ethereum Layer 2 systems uses roll-up technologies to introduce scaling on Ethereum blockchain. Since September 2021, there has been increasing Dapp activity in ETH L2 systems with the current Total Value Locked (TVL) for ETH L2 systems in US$ 5.32 Billion. Leading Layer 2 coins include Polygon ($MATIC), Arbitrum, and Optimism.

Aside from above, another honorable mention is the WAX Blockchain. The WAX blockchain protocol token ($WAXP) is noticeably one of the front runners in the Play to Earn field. The top 4 leading metaverses (Axie Infinity, The Sandbox, Decentraland, and Gala) in Coingecko list here are all built on the Ethereum blockchain. But, the WAX blockchain is at the Top 5, proudly rearing its head out amidst the ETH crowd. Some popular projects in WAX include Alien Worlds, Taco, Farmer's World, Splinterlands, Gods and Legends (GNL), Maxylab, and WAX Arena. WAXP is a promising token as well in 2022 and that is why I also have my $WAXP bag. Think of WAXP as my dark horse! 

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BitYard Exchange
Talking about a lot of coins makes my palm itch. When my palm itch, I feel this urge to trade. I have these Buy The Dip (BTD) urges ever since the crash. Well, since I basically exposed myself to all of you now, another thing I can share with you is about BitYard.

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BitYard is a popular exchange for buying and selling both digital and fiat currencies. It allows the trading of more than 100 cryptocurrencies. It is based in Singapore and has been in operation since November 2019. BitYard is regulated by the following in four countries:

  • US: American Money Services Businesses (AMSB)
  • Singapore: Accounting and Corporate Regulatory Authority (ACRA)
  • Australia: Australian Transaction Reporting and Analysis Center (AUSTRAC)
  • Estonia: Majandustegevuse Register (MTR) or Register of Economic Activity kept by the Ministry of Economic Affairs and Communication of Estonia.

They said the BitYard brand concept is "BitYard = Simple". I agree - the platform is very easy to use. The features are straightforward (Markets, Futures and Spot) and fees are very trader-friendly with an added bit of fun. BitYard has a "Mystery Box" that you can get on random and get free crypto after completing certain tasks. On top of this, BitYard offers a "daily mining" activity in its platform here, wherein you appear to harvest coins from the mountains. You are then able to transfer these harvested coins to your "gift money balance" as USDT that will be auto-deducted once you place an order. Unfortunately, you cannot withdraw the USDT, nor exchange it for other coins, but it served its purpose. Your transaction fee is very much reduced compared to other exchanges. 

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Another feature I like about BitYard is that it allows you to withdraw as much as 100,000 USDT and it has no forced liquidation. Can you believe this? Why don't you check it out for yourself? You will get more details about BitYard here.

Wait, there is more! Did I forget to mention that BitYard has a heart? For each participating post, BitYard will donate 50,000 $SHIB to charity through The Giving Block. What are you waiting for? Pick up the pen or start typing away on your dusty laptop keys this minute! Share your thoughts, and get your shot at the prize!

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The Giving Block was founded in 2018 in the US and was a bridge between nonprofits and cryptocurrency donors to find each other. Since its inception, The Giving Block now provides more than 1,000 nonprofit options that cryptocurrency donors can choose from. You will find more details about The Giving Block and its social media links here.

Conclusion

Overall, my outlook for the crypto market is generally positive, despite of the challenges early this 2022. The mainstream adoption of crypto will continue, with regulations not far off from view. I see Bitcoin as being volatile the rest of the year, with its movement still holding sway over the altcoins. But, underneath all of this, there is stiff competition going on between ETH and the other altcoins. Who knows who will reach the top? But, you bet I will be watching closely, leaning back against my couch, popcorn in hand. As in the world of crypto, exciting times ahead and we will go through it in full steam!

Disclaimer
This article was written as a submission for #MyCryptoOutlook2022 with #BitYard contest. The author holds $ETH, $WAXP, $SOL, $LUNA, $AVAX, $MATIC at time of this post.

 

Hope I was able to provide some useful insights. Any other things you wanted to add? Please leave your comments. If you reached the end of this article, thank you. Please show your support with a like, comment or a tip. It would be greatly appreciated!

 

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Marcusblue
Marcusblue

Crypto enthusiast. Not a financial advisor. Enough about me, let's talk crypto.


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