Predicting the five major trends of Crypto in 2022 from market trends

The year 2021 that has just passed was the most turbulent year in the history of the crypto industry. This is not only because of the strong additions in the number of crypto asset types and market value, but more importantly, the growth of all aspects of the crypto industry in 2021 was due to large-scale adoption and integration of new forms.

In 2021, the Central American country of El Salvador regulated Bitcoin into the legal currency system; non-fungible tokens NFT became a new type of digital product widely accepted by traditional brands and celebrities; Facebook changed its name to "Meta" and planned to explore encrypted digitalization in many aspects; the concept of Metaverse broke through the encryption circle and entered the broader Internet world and even the traditional business field.

Overseas crypto experts believe that 2022 may be a transitional year for the crypto sector, and crypto assets and blockchain products with relevance, practicality and good fundamentals will be most attractive to the investment market and users. Blockchain research company Arcane Research, some crypto observers and KOLs have predicted the trends of the crypto industry in 2022, among which five major trends reflect consensus.

Bitcoin is becoming more closely aligned with traditional financial indicators

Bitcoin and benchmark indices have both locked in impressive gains in 2021, with Bitcoin up 66% and the S&P 500 up about 27%, despite the threat posed by rising coronavirus cases to the global economic recovery. But as Bitcoin increasingly behaves like a risk-on asset, blockchain research firm Arcane Research says it will further amplify major stock market moves.

“If the stock market continues to rise in 2022, Bitcoin will likely outperform,” the firm said, “but if we see a red year for the stock market, Bitcoin will likely underperform.”

According to Arcane Research, the stock market performed well last year, but one pattern has become clear: "Fear of broad financial markets has a direct impact on Bitcoin's performance." The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) is a commonly used indicator of stock market volatility expectations as shown by S&P 500 options. Last year, a surge in the VIX was accompanied by a sell-off in Bitcoin. Arcane Research warns that market headwinds in 2022 could have an impact on Bitcoin's short-term price trajectory.

Arcane Research also predicts that in 2022, we will see more Bitcoin mining bans in countries with weak electricity or insufficient energy supply, "while other energy-rich jurisdictions will embrace the industry."

Ethereum will surpass Bitcoin again

Ethereum, which has long held the No. 2 spot in the crypto asset rankings, has far outperformed Bitcoin in 2021, rising 418% compared to Bitcoin’s 66%. “This gap is the largest we’ve seen since Ethereum launched in 2015,” Arcane said.

One reason Ethereum will continue to outperform in 2022 is the surge in NFT sales. Most crypto assets still run on the Ethereum blockchain, which has real-world utility and supports smart contracts that can be used for a wide range of applications. In 2021, from the Berlin upgrade to the London upgrade, Ethereum has increased the network's ability to handle more transactions.

Roger, an early adopter and investor in Bitcoin and one of the five original founders of the Bitcoin Foundation, also believes that 2022 seems likely to be the year that Ethereum overturns Bitcoin in terms of market capitalization and almost all other indicators. "This may be the case for many other assets in the coming years."

Ethereum could surpass Bitcoin as the most valuable cryptocurrency sometime in 2022, according to Raj A Kapoor, founder of the Indian Blockchain Alliance.

Most Meme Assets Will Disappear

Investors saw meme-like crypto tokens (meme coins) become popular around 2021. For example, Shiba Inu, a derivative of DogeCoin, soared 44,540,000% last year. And SQUID, a crypto asset named after the popular Netflix series "Squid Game", rose more than 75,000% in less than a week, but quickly disappeared.

Arcane Research said, "We can't summarize the 2021 market without mentioning the ridiculous memecoin rally of 2021," adding that the phenomenon will be "a historical relic of the ridiculous era of 2021."

David Z. Morris, chief insight columnist at CoinDesk, believes that Meme coins are basically a casino, but they enjoy a positive feedback loop because the winners attract major public interest, which keeps the winnings rolling. Conversely, downward or sideways cycles are also extremely cruel. "But by 2022, similar behavior among crypto asset newcomers will decrease, and there will be consolidation around informed investments, which means that tokens like DOGE will continue to lose momentum (it peaked in May last year), and new upside will be limited."

David Z. Morris sees Shiba Inu as "an interesting exception" because it reflects a possible demonstration of how a meme can be turned into a real project. "Its ShibaSwap DEX is at least quite interesting on the surface, but I can't say for sure whether it will elevate the project and make its meme coin characteristics disappear."

Metaverse will penetrate the mainstream market

GameFi is considered a subset of the Metaverse because most game developers in the blockchain world have built ecosystems on the chain to be more closely connected to the Metaverse virtual world. Non-fungible tokens (NFTs) are also a branch of the Metaverse. In addition to gamers spending money on digital artworks, not to mention that they will buy game-related weapons, equipment, and even virtual land.

Ishan Arora, partner at crypto hedge fund Tykhe Block Venture, said several themes to watch out for in 2022 include gaming and NFTs, as crypto assets around these themes became popular at the end of 2021.

"In 2021, few expected NFT to become a killer application that would drive mainstream interest and adoption." Sandra, CEO of the Global Blockchain Business Council, also believes that Metaverse will become a place where the curiosity of the mainstream market explodes in 2022.

Raj A Kapoor, founder of the Indian Blockchain Alliance, said that Metavese will become a super powerful theme due to the involvement of traditional technology giants. "Facebook's name change and the subsequent strong growth of crypto games will be noteworthy events."

"Look at the list of major media companies, sports leagues, or content creators involved in digital assets at the beginning and end of the year," Wu of Ava Labs believes that more traditional brand companies will enter the NFT field in 2022.

DeFi innovative products will drive the evolution of public chain networks

"DeFi will still be a big thing in 2022, and we have only seen the tip of the iceberg." Nils Gregersen, founder and chief technology officer of Paycer UG in Hamburg, Germany, believes that there will be many new products launched in the DeFi field that we cannot imagine today.

Chris Kalani, Chief Product Officer of Phantom Wallet, is even more looking forward to DeFi unlocking new use cases for games and payments. “The speed increase and cost reduction of blockchain networks will open doors for us that we did not see in the first wave of DeFi craze, because the development of Layer 1 and Layer 2 will drive developers to conduct more experiments. One area we have already seen is the emergence of decentralized autonomous organizations (DAOs).”

David Z. Morris, chief insight columnist at CoinDesk, said bluntly that one of the really bullish facts he has seen this year is the dispersion of users’ interest in real applications across multiple blockchains. “For example, in the field of NFT and DeFi, we have not only seen Solana, but also the large-scale adoption of Tezos and other blockchains.” He said that there is good reason to believe that in the long run, it is more likely that 2 to 3 dominant smart contract chains will be formed rather than 5 or 6. “Next year will expand the diversity of platforms that people actually use, but with it will come real competition and eventual reintegration.”