ForkLog spoke with experts about the main trends in the cryptocurrency market to watch in 2022.
A bit of everything
Gleb Kostarev, Binance Director for Eastern Europe:
Since the start of 2021 the Bitcoin dominance index has been steadily falling—from 70% to 43%. In that time altcoins showed growth, especially Ethereum, BNB and USDT. This suggests investors are booking profits in Bitcoin, especially after hitting a new all-time high of $68,000 in November. If the trend continues, Bitcoin dominance may fall below 40% for the first time.
Blue-chip altcoins with substantial market share are likely to strengthen in the market as investors rotate into them to maximise profits on the current bull run ahead of a bear cycle. In the coming months, through the end of Q1 2022, we expect higher volatility.
In 2021 the number of institutional investors rose by 22% year over year. In 2022 we also expect further growth in this direction.
New opportunities for the market will come from the DeFi segment. However, to create sophisticated financial instruments such as bonds, fixed income and interest-rate swaps, it will require more experts from the traditional industry. There is also a need to work on increasing liquidity and capital efficiency.
NFTs and GameFi will gain significant momentum, intensifying competition with traditional entertainment markets.
The main security threat to the crypto ecosystem remains social engineering and phishing. Exchanges can counter this through two-factor authentication and educating users about safety rules.
The number of cryptocurrency users compared with traditional finance remains relatively small. Legalisation of crypto through regulatory standards could help attract people from traditional finance. In 2022 we will see a major breakthrough in this area.
On the price of popular coins
Georgiy Verbitsky, Asset Manager:
In 2022 Ethereum has every chance to match Bitcoin in market cap. Ethereum has the largest developer community and the most decentralised smart-contract platform of all blockchains. But new ecosystems will push back. Among those worth watching are Fantom, Cosmos, Polygon, Terra, NEAR Protocol, Avalanche and Polkadot.
I hope that next year Web 3.0, DAOs and ESG will take off. GameFi and metaverse tokens are likely to enter a second wave of hype. In gaming, play-to-earn will continue to mature.
Among exchanges, judging by momentum, FTX will overtake Coinbase in turnover, and Gate.io will overtake Huobi and KuCoin.
On mining and the reallocation of global computing power
Vadim Krutov, Chief Executive of Bitfury Group:
In 2022 we expect an increase in the share of Proof-of-Stake and Proof-of-Authority protocols. The launch of ETH 2.0 could both instantly and significantly alter the balance between Proof-of-Work and other consensus mechanisms.
There will be a multi-fold rise in Bitcoin network hash power due to substantial institutional capital flowing into mining and increased share of computing power owned by public companies – Cipher, Hut 8, Riot and others.
There will be greater emphasis on ESG and reducing the carbon footprint of mining. Mining will begin to shift toward renewable energy sources – solar, wind and nuclear.
If the cyclical nature of Bitcoin price dynamics continues, we will see a new price high for the major cryptocurrencies, followed by a correction.
Roman Nekrasov, co-founder ENCRY Foundation:
The main trend that will take shape in 2022 is US leadership in the mining market. I expect American enterprises to hold at least 40% of global Bitcoin mining next year.
Small and medium mining companies from China, which migrated to Kazakhstan, have already faced electricity shortages. And in Russia there is no clear regulatory framework, so many farms connect illegally or do not report heightened electricity consumption when leasing spaces.
Regulation of mining in Russia is undoubtedly moving toward a negative scenario. This includes calls to raise electricity tariffs and discussions about licensing miners. I think all this will appear in 2022 in Russia, and licenses will be available only to enterprises tied to big business and to billionaires on the Forbes list.
I am sure many Chinese entrepreneurs who initially saw Russia as a great alternative with cheap electricity and favorable climate are now actively working to relocate their operations to a more predictable and stable jurisdiction, ideally the United States.
On DeFi
Anton Bukov, co-founder of 1inch Network:
Many venture investors have realised that the crypto sector is IT, not just a speculation as many thought during the last cycle in 2017. For them it becomes another way to invest in Google, Apple, Facebook, Amazon as 20 years ago.
Over the past two years we have seen enormous growth in spot volumes on centralized and decentralized exchanges. Yet derivatives on cryptocurrencies remain almost illiquid. I expect in 2022 DeFi will fill this gap, thanks to institutional investors and market makers entering the market.
Crucial will be the interoperability between blockchains. Some companies, such as NEAR Protocol and Aurora, are building decentralized bridges (Rainbow Bridge) based on mutual smart contracts, unlike many other bridges that are supported by multi-sig validators.
On regulation in Russia
Eduard Davydov, partner NOA Circle:
At the start of 2021 the law on Digital Financial Assets (DFA) came into force, but instead of bringing order it did not make significant changes to the regulatory framework for crypto in Russia. By the end of 2021, the central bank increasingly called for a complete ban on the circulation of cryptocurrencies.
There remains hope for a “soft” prohibition, whereby Russian banks would not participate in the crypto buying-selling chain, rather than a total ban under which Russians would be criminally liable to dispose of their assets and would be prohibited from any transactions with them.
Michaël Jerlis, CEO EMCD:
I doubt the Central Bank of Russia will opt for a hard ban on cryptos. First, banning crypto physically is impossible—it would push the market underground. Second, the country already has the DFA law. Third, it would be odd to destroy a unique national competency: many successful crypto projects with Russian roots perform on the world stage.
In time, crypto may largely stop noticing regulators, as if teenagers on TikTok with millions of followers are unaware of media laws, Roskomnadzor, and other agencies with overbearing rules they should follow.
We live in a new era; not everyone over 40 can keep up, and it would be odd to demand this from bureaucratic, lumbering mechanisms. But we must understand that, in time, regulators will end up in roughly the same place as the authors of the rules for horse-drawn carriages on dirt roads.
On blockades
Artem Kozlyuk, head of the public organisation “RosKomSvoboda”:
Despite the fact that previously a number of crypto resources in Russia were blocked—exchanges, news portals, and even conference sites—court disputes over the legality of such prohibitions are ongoing. And there have been multiple examples of successful site unblockings in cryptocurrency topics.
I think this plot will repeat next year — prosecutors will file applications in courts claiming that crypto sites “propagate a sanctioned monetary surrogate,” and then there will be successful appeals. This costs everyone time, nerves, and resources.
Alongside this in 2022 expect a new law on cryptocurrencies. There are currently two opposing strategies under discussion: a negative one with punishment and a conditional positive one for bringing crypto out of the grey legal zone. It is not yet possible to predict which strategy will win, but both will have a serious impact on market development in Russia.
On exchanges
Alexander Lutskevich, founder and CEO of CEX.IO:
The main problem for exchanges will be regulators who use traditional approaches to establish norms for this cutting-edge industry. We hope participants will help regulators implement a balanced approach when introducing innovations into the existing legal framework.
Digital payment systems such as Venmo and PayPal are already working on providing crypto-related services. And while these platforms are limited in the number of coins and services, they remain multinational companies with tens of millions of users. Because of this they could become strong competitors to crypto-focused companies from the outset.
Meanwhile, exchanges still have wide opportunities to scale, given their deeper integration with blockchain and popularity among consumers. For example, increasing the number of PoS-based coins will allow trading platforms to offer staking services with a low entry threshold.
Finally, exchanges can offer additional services for storing coins in their wallets. More and more companies are beginning to accept digital currencies for payment, which means they will need custodians to hold proceeds, as well as spaces to settle and convert into fiat.
On the digital concentration camp
Michaël Chobanian, founder Kuna cryptocurrency exchange Kuna:
The main trend next year will be metaverse spaces and their internal cryptocurrencies. They can exist natively or as NFTs.
Regarding regulation, Ukraine is likely to introduce it in 2022. The only thing that could delay it is the dissolution of parliament before a vote. Then everything will be delayed.
Globally, the industry has already undergone AML/KYC procedures, full transparency of all blockchains and operations. Therefore we are already on the road to digital dictatorship, to a digital concentration camp. The question “what to do about it” remains open.
About cybercriminals
Alexander Gostev, Chief Technology Expert at Kaspersky Lab:
In 2022 attackers will probably continue to use standard techniques. For example, stealing cryptocurrency by gaining access to a user’s account on a crypto exchange. They can steal credentials using fake mobile apps or sites that imitate real exchanges or wallets.
There will also be popular schemes where attackers send emails about an initial coin offering or post similar information on social networks from a fake account of a well-known person. Attacks on crypto exchanges and scams involving smart contracts will continue.
Interest of criminals in cryptocurrencies and their use—for ransom after ransomware attacks—will lead regulators in various countries to strengthen control over such assets.
Market participants should remember that it is possible to track cryptocurrency fraud, but after theft it is virtually impossible to fix. Therefore it\’s better to think about security in advance: store funds on multiple hardware wallets, never share private keys, create backups, stay vigilant and remember cybersecurity rules.
On CBDCs, NFTs and metaverses
Denis Vasin, Chief Technical Officer, Waves Enterprise:
The NFT market after explosive growth in 2021 will mature and extend beyond art and speculative collections. NFTs implementing financial primitives and tokens linked to real-world objects will appear.
We will very likely see a peak of hype around metaverse projects. After Meta (formerly Facebook) announced, the market received a huge impulse, but building metaverses requires substantial resources that startups do not typically have. Hence we will see the market begin to consolidate around a few large players.
The corporate sector will also begin to integrate with metaverses. In the near future, representation or an office in the metaverse will become as essential a brand attribute as a social-media account.
Undoubtedly, we will see accelerated development of the CBDC sector. In 2021 many countries started pilot projects and tests that will mature and move into deployment and scale in 2022.