Bitcoin Trends for 2022 From the Experts
Bitcoin opened in 2021 with a strong performance and saw a rapid increase in both adoption and interest throughout the year. The crypto had many milestones, from the first Bitcoin-linked exchange-traded funds (ETFs) to major companies announcing they would accept it as a form of payment. (Then rescinding it, in Tesla’s case.) While Bitcoin closed the year lower than many expected and is off to a slow start in 2022, it’s important to note that the crypto outperformed other asset classes in 2021, including commodities, stocks and gold.
NYDIG, a technology and financial services company dedicated to Bitcoin, released its year in review and outlook for 2022, and several themes from last year- including regulation and institutional adoption- will carry over this new year, they say.
Let’s take a look at NYDIG’s Bitcoin forecast for 2022 and what experts think about them:
Macro Correlations Remain Elevated
“Going forward, we should expect correlations to settle at these new higher levels; there is no reason to expect them to revert to a zero correlated asset. Like commodities though, despite modest positive correlations, Bitcoin should still act as a portfolio diversifier,” NYDIG said in the report.
Reeve Collins, Co-Founder, BLOCKv, a leading platform for creating highly programmable and customizable digital assets, told GOBankingRates that Bitcoin is continuing to unleash new ways for more people, and people who have never had access to banking, to pay and connect with global ecosystems.
“It’s important that Bitcoin be treated as a portfolio diversifier for people to have continued access to this currency and the technology that comes with it. Because it is a young asset, and because it is only being adopted now in a big way, it is to be expected that there will be correlation with equities,” Collins said. “But longer term, this adoption will likely play out in a way in which Bitcoin will be seen as a hedge and, thus, the correlation with equities will diminish.”
Jorge Pesok, general counsel and chief compliance officer for legal-first crypto software company Tacen Inc., echoed the sentiment, telling GOBankingRates that while there is a correlation given that crypto assets are still in their early stages of adoption, he expects it to dissipate in the coming years — in part because the functionality of so many of these crypto assets and protocols are so diverse that they will cater to different markets in different ways.
“For example, it’s hard to see how DeFi or NFTs remain correlated to, say, ETH or BTC given that they all perform so many different functions for users,” Pesok said. “Moreover, Bitcoin, as it continues to grow in adoption, will likely see itself transformed into a risk-off asset, not unlike digital gold. But this will take time and further adoption.”
Regulation of Stablecoins at the Forefront
NYDIG said that there appears to be a predictable partisan split on the issue, with Republicans preferring a lighter touch to regulation than Democrats and that Democrats do not necessarily have enough control in Congress required to avoid compromise.
“Either way, we expect that finalizing an approach to stablecoins will continue to be a major focus for regulation in 2022,” according to the report.
According to Collins, “stablecoin regulation is the most likely regulatory action we will see in 2022, but given the lack of consensus in Congress, I expect it to be a softer touch.”
Ari Redbord, Head of Legal and Government Affairs at blockchain intelligence company TRM Labs, added that following the report on stablecoins from the President’s Working Group (PWG) on Financial Markets last year, it is possible that “while, we are unlikely to see a comprehensive legal framework for crypto in 2022 given the complexities of the issue and a seeming partisan divide, we may see movement on stablecoins given pressure from the PWG report and the laser focus on potential risks.”
Pesok added that there is growing support among regulators and both political parties to address stablecoins, and this is an arena in the crypto industry that is likely to receive relatively swift and, hopefully, constructive regulation.
“Such regulations can include something akin to FDIC-like insurance, not unlike bank deposits, as well as clearer metrics and guidelines for stablecoins to be backed by dollar and dollar-like assets. The crypto industry would welcome something like this, in general, and so there could be a lot of movement here in a positive direction for the coming year,” he said.
Classification of Cryptocurrencies as Securities
“Charmain Gary Gensler has repeatedly indicated that he believes that many of the cryptocurrencies currently traded should likely be treated as securities, NYDIG notes in the report. However, Bitcoin investors can take comfort in Gensler’s historical comments that he does not believe that the digital asset is a security, mirroring the views of his predecessor, Jay Clayton, according to the report.
“However, bitcoin lending products may be in scope for securities regulation. Staking a proof-of-stake currency may also be in scope. It is not yet clear when (or if) the SEC will begin to crack down on either activity,” the report noted.
Pesok agreed, saying that there have already been a slew of crypto lending products, which came under the scrutiny of the SEC and various states.
“Still, the level of support for sensible regulations of crypto-focused products, including for lending, is growing,” he said. “And I suspect that there will be a constructive touch in terms of regulation that will enable such products to flourish,” he said.
Payments as a Use Case Continues to Grow
“Bitcoin is most famously known today as a non-sovereign-backed store of value like a digital form of gold. BTC rewards credit cards, which were rolled out by some companies in a limited fashion at the end of 2020, entered the mainstream in 2021. ‘Get paid in bitcoin,’ or bitcoin payroll, has been topical with mayors and professional athletes throughout 2021. We think 2022 is the year that getting paid in bitcoin can cross the sidelines and be available to the broader public,” NYDIG said.
According to Collins, 2022 is going to be the year for global cryptocurrency adoption as entrepreneurs begin bridging the gap between decentralized currencies and the centralized world through underlying technologies.
“Usability is currently a major roadblock in the quest to bring bitcoin payments to the masses: custody, on-off ramps, difficulty with accessing funds on mobile phones, and interfaces not designed for the target demographic,” Collins said. “As the industry rapidly evolves, I think we will see products that provide users with a seamless way to move decentralized, fiat and digital currencies in and out globally without middlemen, eliminating the major barriers to entry that currently exist and allowing the broader public to pay and get paid via cryptocurrency.”
Possibilities: Will 2022 be the Year of a Spot Bitcoin ETF?
BLOCKv’s Collins is optimistic as to Bitcoin’s outlook in 2022, despite the Fed’s tightening of its monetary policy due to inflation, which in turn have triggered broad-based selloffs in both equity and crypto markets.
“This is to be expected,” Collins said. “But at some point, perhaps even now, the selling will be seen as too strong a reaction. And as things calm, we will again see major price growth broadly in crypto. So if you look beyond the next year or so, Bitcoin, in particular, is poised for strong growth.”
For Redbord, the main theme is clarification on regulations in 2022, as “there is a myth that crypto is the Wild West,” he said — a reference to Gensler’s 2021 comments.
“What we actually see is an already-regulated space in the U.S. where crypto businesses are required to build out risk-based compliance controls. And there is more visibility on financial flows than we have ever had before,” he said, adding that this visibility on the blockchain allows law enforcement to trace the flow of criminal proceeds and allows regulators a birds-eye view of their regulated ecosystem.
“In 2022, we are likely to see more clarity on regulations. Are certain cryptocurrencies securities or commodities? Should DeFi projects be regulated as MSBs like exchanges? And, how do we categorize and regulate the exploding NFT space?” he said.
As for Pesok, he too is optimistic about Bitcoin’s outlook this year.
“Bitcoin spawned a revolutionary innovation that is seeing all kinds of novel products coming to market that, in turn, bring tremendous value to people around the world,” he said. “Indeed, the rapid rate at which adoption of Bitcoin and other crypto-assets is happening suggests that, if you zoom out, we are still in the early stages of a fast-growing industry that is poised to experience massive growth over the coming year. Indeed, it’s hard not to be optimistic about where this industry is headed.”
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