Golden Observation | Forecast of cryptocurrencies and regulatory trends in 2022

2021 is definitely a record-breaking year in the history of cryptocurrencies, and it is also a year in which cryptocurrencies continue to mature. What changes will the crypto market usher in in 2022? Many institutions have given multi-faceted predictions on the direction of cryptocurrencies, regulatory trends, and macro market conditions.

Crypto market trend prediction

On January 6, according to the latest data from digital currency management company CoinShares, cryptocurrency funds have experienced investment outflows for three consecutive weeks. CoinShares said that the total outflow of funds from the crypto industry last week was US$32 million, and the total outflow in the past three weeks reached US$260 million. The overall capital inflow in 2021 reached US$9.3 billion, a sharp increase of 36% from 2020. It is worth mentioning that Bitcoin has the lowest increase in capital inflows compared to other digital asset investment products. According to the latest research report from blockchain data provider Glassnode, among many on-chain indicators, Bitcoin is generally lacking in vitality and liquidity is getting worse, while investors' profitability and cyclical indicators paint a more pessimistic picture. Glassnode concluded that with the balance of bull and bear market signals, it is expected that the early 2022 may continue to be consolidated .

Former Wall Street trader and Bitcoin advocate Max Keiser reiterated that he believes Bitcoin will reach $220,000, but changed his prediction to 2022, as his previous prediction for 2021 ultimately failed to come true. According to a tweet posted by Keiser, he believes that the computing power behind the network, or hashrate, precedes the price of the cryptocurrency, meaning that new highs in hashrate will translate into new highs in price. Bitcoin's hashrate has increased 49% year-over-year, from 136.5 exahashes per second (EH/s) at the beginning of January 2021 to 203.5 EH/s this week, a new all-time high.

Mike McGlone, senior commodities strategist at Bloomberg, believes that deflation could replace inflation in 2022. The peak in commodities and the decline in long-term Treasury bond yields indicate that deflationary forces are likely to revive in 2022, which will have a positive impact on Bitcoin and gold. Bitcoin is expected to reach $100,000, while gold will trade at $2,000.

Intelligence and data firm S&P Global suggests that cryptocurrencies and decentralized finance will continue to grow in 2022. In its latest report, the company examines the current state of the market and notes that while there are still some serious issues that could hinder adoption, the industry will keep growing in the coming year by complementing traditional finance. According to the report, tokenization can also be a powerful force, helping people invest in assets that they wouldn't be able to invest in without these tools. In other words, tokenization can offer the possibility of democratizing opportunity. Regulation will also be a big part of next year, with the industry still needing "a regulatory framework that recognizes the rights of token holders and smart contract protocols."

CNET's predictions for crypto in 2022 indicate that crypto will become more mainstream ; NFTs will create new ownership mechanisms; the industry will face greater hacker attacks and larger ransoms; stablecoins will play an important role; and new crypto rules will come to light.

Salvadoran President Nayib Bukele tweeted his predictions for Bitcoin in 2022. 1. It will reach $100,000; 2. More countries will adopt it as legal tender; 3. It will become a major election issue in this year's US election; 4. Bitcoin City will begin construction; 5. Volcano bonds will be oversubscribed.

Crypto mainstream trend prediction

Forkast.News released its predictions for the crypto industry in 2022, pointing out that there will be three major trends: DeFi becomes mainstream, and regulators will follow closely; NFT use cases continue to expand with the establishment of the metaverse; and the rise of DAOs will change the way we live, work, and participate.

Finch Capital released a forecast report on European fintech in 2022, which pointed out that Crypto/DeFi has become mainstream, and the adoption of Crypto and DeFi by enterprises has paved the way for the global popularization of encryption. The report also stated that the increase in CVC investment funds in this field has also promoted the global upgrade of policy supervision.

Coinbase released 10 predictions for the Web and crypto economy in 2022, including that Ethereum's scalability will improve, but new Layer1 chains will see substantial growth; the usability of L1-L2 cross-chain bridges will be significantly improved; zero-knowledge proof technology will receive more attention; regulated DeFi and on-chain KYC proofs will appear; institutions will play a greater role in DeFi participation; DeFi insurance will appear; NFT-based communities will bring substantial competition to Web 2.0 social networks; brands will begin to actively participate in Metaverse and NFTs; Web2 companies will wake up and try to enter Web3; the DAO 2.0 era is coming.

Canadian businessman and celebrity investor Kevin O'Leary said in an interview: " I think NFT will be bigger than Bitcoin . NFT provides so much value in authentication, inventory management and various use cases of different asset classes. I prefer NFTs related to hard assets and physical assets; I have made a significant investment in Immutable Holdings, which owns NFT.com launched in January, and WonderFi, a company that integrates assets in the crypto field. There is still a lot of work going on to make these ubiquitous and liquid NFTs that can be traded on any blockchain. These assets will become very large, and I think 2022 will be the first year of NFT. "

The Block released its 2022 forecast: The L2 ecosystem will experience a higher growth rate than L1 ; ZK-rollups (ZKRs) will have more adoption than Optimistic rollups (ORU), with StarkNet leading the way; mining experts predict that by the end of 2022, there will be more than 30 publicly listed Bitcoin mining companies; structural market experts predict that 2022 may witness the approval of a futures-based ETH ETF, but not a spot-based BTC or ETH ETF. In addition, some analysts believe that the merger of Ethereum 2.0 will occur by the end of 2022 .

Prediction of regulatory policy changes

Benoit Coeure, head of the Innovation Hub at the Bank for International Settlements (BIS), recently revealed in an interview with the Financial Times that a global regulatory framework for cryptocurrencies could be ready by 2022. Coeure noted that given that cryptocurrencies are rapidly entering the mainstream, it is time for comprehensive regulation. The former ECB executive director seems particularly concerned that the rapid growth of DeFi poses a threat to traditional finance (TradFi), creating "systemic risks." Coeure claims that different jurisdictions may come up with piecemeal approaches to cryptocurrency regulation, which is inefficient on a global scale. However, he believes there is still enough time to avoid regulatory arbitrage and establish a global regulatory framework for this emerging asset class. Coeure also said that protecting consumers should be the top priority for policymakers. Therefore, he proposed to ban pension funds from gaining exposure to cryptocurrencies to avoid related risks.

Recently, Flori Marquez, co-founder and senior vice president of operations of Blockfi, discussed the future prospects of cryptocurrency entering 2022 in an interview with Yahoo Finance Live. She said: "In the coming year, we will see more American consumers entering this field for the first time. Secondly, we will see "talent recycling". Due to the Covid-19 pandemic, many people are changing jobs, and the cryptocurrency and fintech fields are very attractive." She also pointed out that 2022 may see clearer regulation.

Bloomberg Intelligence analyst Mike McGlone shared his outlook for the future of the cryptocurrency market. McGlone said that encouraged by the Chinese ban and the proliferation of revolutionary technologies such as crypto dollars and NFTs, we expect the United States to accept cryptocurrencies in 2022 , and with proper regulation and related bullish price impacts, Bitcoin seems to be on track to $100,000, and we may see pauses, corrections, and renewed bull markets. The unlimited supply of fiat currencies should maintain price increases, especially in Bitcoin and Ethereum, which have limited supply, and we expect wider adoption to prevail and overcome most fluctuations, such as the correction of nearly 50% in 2021. In addition, some normalization of stock market returns and the continued decline in U.S. Treasury yields may affect Bitcoin and Ethereum in the portfolio. As we approach the beginning of 2022, the key question facing Bitcoin is whether it has reached its peak or continues to consolidate the bull market. We believe it is the latter, and in such a world, the benchmark cryptocurrency is moving towards becoming a global digital collateral. The key support level in 2022 may be around $50,000, and the resistance level is around $100,000.

In an interview with Bloomberg, FTX CEO Sam Bankman-Fried said that the regulation of cryptocurrencies will become increasingly clear in 2022, not only in the United States but also globally. He said that the government's stance will help promote cryptocurrency trading and greatly facilitate the entry of large investors. He also said that 2022 will mark the beginning of a major breakthrough in stablecoin regulation, and the SEC and CFTC may become more involved.

Stablecoin and CBDC predictions

Angie Lau, founder and chief editor of forkast, said that if 2021 was a landmark year for cryptocurrency, then 2022 is likely to mark a sea change in the digital asset space as state-issued digital currencies continue to have strong momentum. No matter how you look at it, 2022 seems to be a breakthrough year for CBDCs . As the CBDC race gains momentum, a key question is: Can the monetary authorities of those countries achieve a breakthrough in 2022? Can the monetary authorities of those countries that have launched CBDCs, as well as the dozens of other countries that are seeking to develop them, allow private cryptocurrencies to coexist with them? More precisely, do they have the political will to do so? If not, the current Mexican wave in the cryptocurrency field can conceivably become a tsunami.

Forbes released its predictions for the crypto market and blockchain in 2022. The article states that 1. NFTs will become boring in 2022. Especially since there are many misunderstandings about the operation and valuation of NFTs in the mainstream market, what people often overlook is the true value and usage of NFTs. 2. Stablecoins will become mainstream. According to the report of the Presidential Task Force, the utilization of stablecoins increased by 500% between October 2020 and October 2021, and there seems to be no trend of this adoption rate decreasing . 3. Crypto payments will continue to exist. With major organizations such as PayPal adopting crypto asset payments, Visa and Mastercard using crypto assets for transaction purposes in 2021, the trend seems to be permanent. 4. Bitcoin will reach $100,000. The rise in inflation, continued monetary easing around the world, and the proliferation of crypto assets all point to the following conclusion; crypto assets will continue to exist.

Sean Stein Smith, a professor at Lehman College of the City University of New York, wrote that stablecoin-friendly policies will help make 2022 a breakthrough year for the industry. Smith believes that some policy provisions can and are expected to accelerate the rapid adoption of stablecoins : Differentiating between stablecoins. In order to further develop and expand opportunities for the use of stablecoins, it is necessary to distinguish between stablecoins and other crypto assets. Currency competition is a good thing. Competition is a good thing, and the best components of different tools will be integrated into any option that ultimately makes it mainstream. Simpler reporting requirements. The current reporting obligations seem more suitable for crypto assets with higher volatility than stablecoins. It is understandable that government authorities want to impose taxes when appropriate; in this case, this is not the problem. The problem is that the rules that have been implemented seem to artificially undermine the main use cases of the tools in question (stablecoins). The article concludes that entering 2022 is the best time to review, revise and improve stablecoin-related rules and policies. Stablecoins can play a key role in providing bridges and entrances for market participants at different levels of expertise; effective policies can greatly help achieve this goal.

Prediction of macro-environmental changes

A congressional subcommittee is preparing for a hearing to examine the environmental impact of cryptocurrencies, particularly bitcoin mining, three people familiar with the matter said. The House Energy and Commerce Committee's Oversight and Investigations Subcommittee is apparently developing a roster of witnesses to explain the energy use of proof-of-work cryptographic validation, especially the bitcoin network. The timing and witness list have not yet been determined, but the hearing could take place as early as the end of this month. A source involved in pre-hearing discussions with the subcommittee said the committee has become particularly concerned in light of recent events in New York State.

Citigroup strategists expect global economic growth and inflation momentum to slow in 2022 and continue to overweight stocks. Strategists including Jamie Fahy said they expect the slowdown in growth momentum because risk-return has deteriorated as the current cycle progresses, and inflation in emerging markets is expected to peak earlier than in developed markets. They wrote in the report that they turned to relative value views on government bonds and credit, increased some emerging market risks, remained bearish on base metals, and remained neutral on energy.

TD Securities believes that the dollar could strengthen in 2022 as the Fed prepares to raise interest rates as early as March. Analysts at JPMorgan also said: "The Fed's recent speech indicates that March (rate hike) is coming, and we continue to believe that risk/reward preferences will respect this result, thereby supporting a stronger dollar in the new year." At the same time, they expect the euro/dollar EUR/USD to consolidate in the 1.12-1.14 range, but there is also a risk of a sharp drop below this range as rumors about the final direction of the balance sheet may push up U.S. real interest rates.

On January 5, Goldman Sachs believes that as long as the Fed's rate hikes remain gradual, the US dollar will decline moderately this year . Goldman Sachs strategist Zach Pandl wrote in a research report that the US dollar is more likely to fall than rise this year, which is a view that is out of consensus. The risks facing the US dollar in early 2022 tend to be upward. The Canadian dollar will perform best among G-10 currencies this year, and the Australian dollar will be the worst performing currency. Unless the European Central Bank turns to raising interest rates, its policy normalization will not be able to support the euro.

UBS said the S&P 500 will show different performances in the first and second half of 2022, with an expected rise in the first half and then a pullback in the second half. Strategists led by Keith Parker wrote that the S&P 500 could rise above 5,000 in the second quarter of 2022, boosted by a 13% increase in expected EPS, while a decline in COVID-19 cases is expected to offset the adverse effects of tighter financial conditions. Cost pressures are expected to continue in 2022, and slower EPS growth coupled with Fed rate hikes and political uncertainty are expected to bring the S&P 500 back to 4,850 by the end of the year. Financial, energy and value stocks are expected to outperform in the first half of the year, thanks to higher yields, Fed rate hike expectations and strong EPS momentum.