Since the inception and launch of Bitcoin — the genesis cryptocurrency, and the largest by market capitalization — in 2009, each passing year has given rise to new trends that have continued to define the ever-evolving cryptocurrency industry.
By all indications, 2022 will be no exception, as more and more unconsidered aspects of the rapidly-emerging industry are brought to light. So far, we have witnessed the emergence of a range of new use cases for crypto-class assets. Moreover, we have seen the governments of many nations become more open to the possibilities provided by the crypto economy. But of course, there is so much more still to be discovered!
Before we dive right into some of the upcoming, new crypto trends to keep an eye on in 2022, it is crucial to stress the importance of understanding and becoming familiar with these trends.
Understanding crypto trends is essential for making informed decisions as an individual or a corporate organization. For instance, as a company that renders crypto-related services, it is viable to project or estimate a specific result based on existing and upcoming trends, as well as the data associated with each one.
For instance, it can be justifiably predicted that there will be an increase in metaverse adoption simply by noting the trend of corporate adoption in the space; seeing the likes of Disney, Nike, Adidas, etc, joining the metaverse craze makes it realistic to predict a surge in corporate adoption in the coming years.
In addition to facilitating informed decisions, trends also enable individuals and organizations to set realistic goals and objectives when planning or mapping out a project, campaign, or related activities.
Trends can further be addressed as a continual measure of progress in the space, since they allow individuals and corporate organizations to track the space’s development, while also using them as a key metric for determining long-term viability, especially where scalability is of major concern. With this under consideration, below are some of the major trends to keep an eye on for the year.
Top 10 Cryptocurrency Trends to Watch Out for in 2022
You may be wondering why 2021 would be referred to as a trend. The truth is that the year of 2021 was a defining moment for the entire crypto ecosystem. It represented a moment of truth for every stakeholder, from Governments, regulators, and developers, down to the end-users. But what was so special about 2021? You may ask.
To begin with, the fourth quarter of 2021 saw a significant increase in global crypto adoption, with the number of users rising from the slightly over 100 million recorded in the fourth quarter (ending December) of 2020, to nearly 300 million in the fourth quarter of 2021, representing an increase of nearly 200% over the course of a single year.
The figure also implies that, in 2021, the total number of new crypto users outnumber those who joined the space in the preceding 12 years following the first cryptocurrency going public. Not only was there a significant surge in crypto adoption for 2021, but its influence was also felt in the year’s total crypto market capitalization.
Most notably, crypto’s total market value grew exponentially, soaring to an all-time high of $3 trillion, up from the $758 billion of 2020. In addition to this, blockchain transactions and usage, as well as smart contract adoption, exploded, reaching $3.5 Trillion in volume on the Ethereum Network.
Without a doubt, Ethereum became the year’s most active blockchain network, and the massive growth it experienced throughout the year can be attributed to the widespread proliferation and adoption of Ethereum-based projects such as NFTs.
Speaking of NFT, crypto’s 2021 story certainly cannot be discussed without mentioning NFTs and how they took the world by storm. While a lot of development is still going on in the space, we have seen how great an impact NFTs can have on the decentralized economy, and that’s even despite having barely scraped the surface when it comes to their use cases.
Aside from the positive numbers, 2021 heralded a lot of unusual trends that will doubtless shape the crypto world moving forward. Perhaps most importantly, we witnessed the democratic republic nation of El Salvador announce the official adoption of Bitcoin as legal tender on September 7th, 2021, becoming the first country in the world to do so.
2021 also saw countries such as Nigeria join the likes of the Bahamas, the Eastern Caribbean Union, China, and so on in working to implement their own central bank digital currency (CBDC). So far, 9 countries have fully launched their respective digital currencies, while 87 nations (representing over 90% of global GDP) are exploring the possibility of a CBDC. This stands in stark contrast to the just 35 countries considering a CBDC in May 2020.
Similarly, a number of large corporations have thrown their hats into the ring, expressing their interest in the crypto arena, particularly in the rapidly growing metaverse world. Major firms such as Adidas, Nike, Microsoft, Facebook, Disney, Google, Aston Martin, and others, wowed their audiences after announcing their forays into the metaverse world.
But it didn’t end there; another key highlight of 2021 was the tremendous increase in the supply of stablecoins, which rose from $29 billion to $151 billion, representing a 421% increase in a single year.
Coinbase listings in 2021 marked another noteworthy event, as it signalled a major show of strength for an industry that had gone ignored for a very long time. For some reason, the exchange listing on Nasdaq changed investor perceptions of the emerging industry and made a lot of people around the world have second thoughts about investing in the digital asset ecosystem (DAE) as a whole.
With so much inflow into the crypto market, 2021 was the year that Venture Capitalists had to choose whether to sit on the sidelines and watch the market thrive, or to join in and play. Venture capital investors seemingly made their choice, investing a record $30 billion into cryptocurrency companies in 2021, eclipsing the previous high of $8 billion set in 2018.
Finally for 2021, the question of regulation came to the fore as a prominent issue, and naturally, this trend is expected to continue through 2022. A lot of attempts to regulate crypto regulations took place as crypto activities received the beginnings of some much needed infrastructure in various countries.
For instance, while countries like El-Salvador elected to adopt bitcoin as legal tender, China opted to make it illegal, actively banning mining activities. Other nations tentatively installed passive guidelines, but the majority of nations have stated their intent and are working on regulating the financial playing field to accommodate their upcoming CBDCs.
If there is one trend that will live beyond 2021, it is that cryptocurrencies and blockchain technology are here to stay, and the world will have to adjust accordingly to that new reality.
9. Crypto Warfare
A matter of months into 2022, and the cryptocurrency industry has made it into headlines for what could only be described as an unprecedented and dramatic turn of events. Stepping out of 2021, one may have anticipated that the crypto industry’s upward trajectory could only bring more good news; that was until we saw digital currencies facilitating one of the world’s biggest invasions in recent history.
Amid Russia’s invasion of Ukraine and the horrible scenes from the ongoing shelling taking place in Ukraine, crypto has played instrumental roles for both the attacking and defending nations respectively.
Russia has turned to cryptocurrencies to combat the series of sanctions levied against them for the invasion. The motive for doing so is founded on the nation’s effort to circumvent any limitations that may arise as a result of the numerous sanctions.
On the other side of affairs, Ukraine has also sought aid in the form of crypto, even launching a dedicated website for any individuals or organizations willing to donate to the country with digital assets.
According to a CoinDesk report dated March 9th, 2022, Ukraine has received close to $100 million in crypto donations, a figure that is expected to increase further with no sign of the war coming to an end any time soon.
While cryptocurrency’s current involvement in the ongoing invasion of Ukraine is nonpartisan, it is not ethical in humanitarian terms. Regardless, cryptocurrency’s active participation in the unfolding events heralds the start of a new trend in crypto warfare.
In the worst-case scenario, this may serve as a wake-up call to the ruthless nature of a decentralized financial system, while in the best-case scenario, it could demonstrate how indispensable the fledgling industry has become.
8. The Increase in Corporate Crypto Features and Dynamic Use Cases
Picking up from where things 2021 left off, more corporations are still wading confidently into the crypto space. The nascent industry has seen a wide array of giant brands including the likes of Disney, Microsoft, Google, and Apple, announce their forays into the metaverse space.
While some corporations have made moves driven by FOMO, others are doing so out of a perceived necessity. As such, there has been a correlated increase in the dynamic use cases of crypto assets, including NFTs and metaverse integrations.
For instance, Microsoft is currently building a ‘SharePoint’ based solution that enables workers to interact with each other more efficiently, regardless of their physical locations. The blockchain-based project, named ‘Virtual Office’, is set to introduce more dynamism to corporate interaction.
Other companies, like Amazon, Apple, Google, and Meta (formerly Facebook), are hastening their individual development and deployment of augmented reality headsets, which could soon become standard in the workplace. It’s also worth noting that, as interest among corporate ventures grows, more use cases for crypto products and services may come to light.
7. The Rise in Crypto Venture Capital (VC) Firms
After the global crypto market hit $3 trillion in market capitalization, it became really clear that the emerging industry could not be ignored for long. This was especially apparent in terms of venture capital investment, which skyrocketed to an approximate $30 billion in 2021, up from the $8 billion recorded in 2018.
In 2022, more VCs have shown commitment to emerging crypto projects, while new VCs are constantly springing up. Just recently, crypto investor Katie Haun reportedly raised $1.5 billion for her new firm following her surprise departure from Andreessen Horowitz last year. Haun Ventures, the newly birthed VC, will focus on Web 3.0 projects and with two major segments as its core interest — early-stage and acceleration stage projects.
Like Haun, there are several other rising-star crypto venture capitalists around the world making waves in the crypto space. Notable names include Morgan Beller (General Partner at NFX), Ria Bhutoria (General partner at Castle Island Ventures), Casey Caruso (Investment partner at Paradigm), Brett Gibson (General partner at Initialized Capital), Gaby Goldberg (Investor at Chernin Group Crypto), and so on. Here is a list that comprises several rising-star venture capitalists to watch out for.
6. Ethereum 2.0 Reaching Its Full Potential
Although Ethereum 2.0 (otherwise known as Serenity) was launched in December 2020, the upgrade is scheduled to take place in chunks. The blockchain network is yet to fully transition from Proof of Work (PoW) to Proof of Stake (PoS), which ultimately suggests that the latest Serenity upgrade is yet to reach its full potential.
Having said that, much of Ethereum’s transition from PoW to PoS is expected to happen this year, implying that the network will be able to achieve the following traits:
- Lower energy consumption — by switching to PoS, Ethereum will be able to maximize the computational resources of its network nodes. Therefore, instead of having validating nodes compete, as in the case of PoW, the new model will randomly select validating nodes to single-handedly fulfill a task that would otherwise require many inputs. This way, computational efforts geared towards the validation process are efficiently managed, leading to lower energy consumption.
- Deflationary Ether — With the latest upgrade combining EIP 1559 and proof-of-stake, the circulating supply is expected to be driven down. To elaborate, the upgrade introduces crypto burning to the network; this means that, combined with lower rewards and Ether locked by validating nodes, the circulating token supply is expected to dwindle to an average between 27.3 and 49.5 million ETH, in comparison to the the current supply which sits at 118 million ETH. By going as low as 27.3 million ETH, it is expected that scarcity will be generated, which will in turn result in a hike in the token’s valuation.
III. Same execution layer — This implies that existing projects on the classic Ethereum network will maintain the same integration model post. In other words, Ethereum’s current execution layer will be ported over to the incoming Proof of Stake consensus layer and be supported by the clients that are currently in charge of Eth1.
- Scalability — By replacing hash power with randomness/statistics, and keeping block size low, Ethereum will enable any user, even with average hardware, to profitably and efficiently run a validating node. In theory this means that more validators will be onboarded, ultimately improving transaction speeds.
With all of these benefits underway, Ethereum usage is expected to grow tremendously as 2022 unfolds.
5. An Increase in Layer 2 smart contracts
As seen last year, Layer 2 smart contracts are gaining traction, and this is a trend that isn’t going to fade anytime soon. Bitcoin and Ethereum, for example, are termed “Layer 1” cryptocurrencies, since they have their own settlement layer.
Sadly, most Layer 1 blockchain networks are not scalable, necessitating the creation of a different framework (i.e. Layer 2 smart contracts) on top of them in order to achieve greater scalability. As a result, L2 smart contracts are critical for achieving mainstream cryptocurrency adoption as they facilitate the indefinite scaling of cryptocurrencies.
4. More IPOs, Use Cases, and Adoption
Last year was remarkable for the crypto industry, thanks to noteworthy moments such as Coinbase listing on Nasdaq. The event also marked the first major IPO in the emerging industry, though certainly won’t be the last of its kind.
Cryptocurrency technology company Rhodium Enterprises was touted to go public in January 2022. According to a Cointelegraph report, the cryptocurrency-focused technology company was planning to offer 7.69 million shares at $12 to $14 each, with a valuation almost at $1.7 billion, possibly becoming the first crypto initial public offering (IPO) for the year.
Although these plans were subsequently delayed, with unfavorable market conditions cited for the decision, it is bound to take place sooner or later. Likewise, we may see more such moves as more enterprises like Binance, FTX, and others grow fat pockets.
3. Crypto Continuing to Drive the Adoption of Green Energy
Cryptocurrencies have received a lot of criticism for their negative impact on the environment. Bitcoin mining, for example, generates an estimated 40 billion pounds of carbon emissions in the United States alone.
These significant carbon emissions, however, can largely be attributed to the network’s consensus mechanism, Proof of Work (POW), which necessitates the use of fossil fuel-generated energy.
Bitcoin is not alone in this, as other traditional blockchain networks, such as Ethereum, have similarly continued to rely on the PoW consensus process for a long time. Nonetheless, the narrative is gradually shifting as emerging blockchain networks have consistently begun to incorporate more eco-friendly consensus mechanisms.
Interestingly, the ongoing attempts to create a more sustainable consensus mechanism has greatly driven the adoption of green energy.
2. More DeFi Experimentation
It’s no secret that DeFi is an experimental niche within the crypto space, as evidenced by the large number of products and service categories that are currently operational. According to defiprime, a website that tracks the number of projects within the DeFi ecosystem, there are approximately 18 categories of products and services in the DeFi space.
While this is barely a decade-old sector, the DeFi ecosystem is an excellent indication of how quickly the general crypto industry is developing. Furthermore, while this has been a progressive trend up to 2021, with relatively new categories such as decentralized insurance sprouting, it can be realistically expected that more categories will continue to emerge even this year, thanks to the significant advancements in blockchain technology.
This article would be incomplete without discussing the impact of regulation on the emerging crypto industry. Interestingly, we’ve witnessed how the crypto space, which had previously been neglected, has risen to become a major focus of attention for governments and authorities around the world. Of course, the reason for this can be attributed to a great many factors, the most prominent of which is undoubtedly the disruptive nature of cryptocurrency.
That said, the regulation of the global crypto space has continued to take new forms over the years, and, given that the industry is still in its infancy, this is likely to continue.
Thanks to mainstream crypto adoption, many of the world’s governments have transitioned from actively banning crypto operations, to proactively working on adoption policies over the past few years.
For instance, the United States, the United Kingdom, Canada, Germany, Italy, and, most recently, India, have all implemented their own DAE and tax regulations to govern their respective crypto ecosystems.
Typically, these tax regulations are applicable to any type of cryptocurrency investment or transaction, implying that individuals will now be required to remit proceeds from their crypto activities to the government. You can read our comprehensive guide to learn more about crypto tax regulation.
While tax regulation is only one of many rules for keeping an eye on the crypto space, there are many more in the works, so as crypto enthusiasts, we may need to brace ourselves for the unpredictable consequences.