The European Union is increasingly showing signs of accepting cryptocurrencies, and the rise of NFT activity points to a bright future.
The Discussion
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Cryptocurrency
This article was originally published on the Conversation by Erica Pimentel, Queen's University, Ontario; Bertrand Malsch, Queen's University, Ontario; and Nathaniel Loh, Queen's University, Ontario, and is reprinted here with permission.
Several major breakthroughs in cryptocurrency occurred in the year 2022
For one thing, new crypto applications such as non-fungible tokens (NFTs) gained traction, with NFT sales breaking records at major auction houses. Second, Bitcoin has made progress toward mainstream acceptance, with major websites such as Expedia and Microsoft now accepting Bitcoin as a form of payment. Third, El Salvador became the first country in the world to recognize bitcoin as legal tender in September.
There are numerous other examples of how the cryptocurrency market has grown in the last year. What does the future hold for cryptocurrencies in 2022, given this surge in activity?
We predict cryptocurrencies will gain traction in three areas over the next year: wider adoption of Bitcoin as a payment method, higher regulatory scrutiny, and increased NFT activity
Bitcoin's acceptance
Researchers have had a difficult time figuring out what motivates people to use Bitcoin. According to a recent study, there are five primary criteria that influence whether or not someone will use Bitcoin:
Have faith in the system.
Word of mouth on the internet.
The transactional quality of the online platforms provided.
The investment's perceived riskiness.
Bitcoin's performance is expected to perform well.
Other research have brought more subtlety to this argument by taking gender, age, and educational level into account.
The current state of the cryptocurrency market has made it more probable that Bitcoin will become mainstream in the near future.
For starters, there's more activity in online groups like Twitter and Reddit, where even crypto newbies can share information with seasoned investors to get advise on price predictions and trading tactics.
Second, there has been an explosion of new crypto-exchanges — or trading platforms where one may exchange fiat cash for crypto — as well as significant investments in existing exchanges' technological infrastructure. Institutional investors are becoming more interested in crypto markets as a result of these infrastructure expenditures.
Institutional engagement, as well as regulatory oversight
Institutional entities such as the European Investment Bank (EIB), the European Union's lending arm, have taken a stand on cryptocurrency in the previous year.
The European Investment Bank (EIB) released a 100 million euro digital bond on the Ethereum blockchain in April. The offering also included Goldman Sachs, Banco Santander, and Société Générale. Institutional adoption has been identified as a tipping point for mainstream crypto adoption, and it appears we're on our way there.
In 2022, the expanded availability of points of sale that take Bitcoin as a form of payment, as well as institutional investment in the field, will almost certainly lead to broader adoption of Bitcoin as a form of payment.
Decentralized finance (DeFi) is commonly viewed as the next frontier in fintech after cryptocurrency. DeFi allows for the creation of decentralized systems that rely on distributed ledger technology to promote peer-to-peer lending, the creation of new financial assets such as stablecoins, and even the introduction of new corporate governance models.
Regulators appear to be paying more attention as well. The European Council, which sets the European Union's political goals, stated its view on the Markets in Crypto Assets (MiCA) framework in November, which will provide greater regulatory clarity on cryptoassets and DeFi.
In the same month, the Federal Reserve Board of Governors, the Federal Deposit Insurance Corporation, and the United States Comptroller of the Currency issued a joint statement declaring that they would issue a set of crypto policy instructions.
Researchers have identified a lack of regulation as a fundamental impediment to crypto adoption in the mainstream. Increased government control, combined with numerous countries' consideration of digital versions of their national currencies, will almost certainly result in a surge in regulatory action in 2022
An increase in the number of NFTs.
The year 2021 heralded a new era in NFT sales. In the same way that a tangible canvas can provide proof of ownership of a Vincent Van Gogh painting, an NFT can provide proof of ownership of digital art.
Although NFTs were originally intended to be used to establish ownership of digital art, they have since been broadened to incorporate other sorts of digital property, such as digital real estate.
NFT sales are breaking records, with one recent auction raising $17.1 million at Sotheby's. As a result, the auction house developed Metaverse, a non-financial-transactions-only platform for the selling of digital works.
In 2022, as new NFT applications emerge, this market will most certainly continue to expand.
Be careful what you buy.
Regardless of these investing potential, we advise crypto investors to remain wary of statements made in internet forums. Before investing, crypto enthusiasts must at the very least do their homework.
New frauds and schemes are certain to arise in 2022. Consider the SquidGame cryptocurrency, which was based on the popular Netflix program but turned out to be a scam. Or there's the bogus Banksy NFT that sold for £244,000 in the UK.
According to research on the behavior of retail investors, some are particularly vulnerable to "fear of missing out."
As a result, it may be difficult to refuse a tip on the next hot crypto opportunity from your hairstylist or your best friend's cousin. Crypto investors, on the other hand, should educate themselves on the technology as well as the fundamentals of financial markets if they wish to invest wisely.
After all, cryptocurrency is still speculative and not for everyone.