Cryptocurrency: what awaits the crypto-industry in 2022?

In 2021, the overall capitalization of the cryptocurrency market has increased several times, and institutional investors no longer look at it as a “crazy idea”. In 2022, the sector expects an increase in hacking attacks, meta-universe wars, and the cryptocurrency market’s rapprochement with the state

What was 2021 like for the crypto industry? In 2021, bitcoin more than 10 times set historical records in price, according to the website CoinMarketCap, in 10 months the total market capitalization of cryptocurrencies has almost quadrupled, reaching $3 trillion, Bloomberg wrote in November.

However, it already collapsed to $2.2 trillion on December 14, according to CoinGecko website. Still, the market’s growth is impressive – cryptocurrency has become “an asset class that we could no longer ignore,” Ajit Singh, chief investment officer of the Houston Firefighters pension fund, told Bloomberg, explaining why the fund decided to invest $25 million in bitcoin and ethereum. 

This pension fund is not the only one that has decided to invest in crypto-assets. To date, 52 companies with a total capitalization of $7.1 trillion have “taken on” cryptocurrency risk and invested in cryptocurrency or related instruments, MSCI estimated in October. These include publicly traded Coinbase, MicroStrategy, Tesla and others. The BlackRock Investment Fund began buying bitcoin futures. And Soros Fund Management CEO Dawn Fitzpatrick told Bloomberg in October that the fund “has some coins.”

One reason institutional investors have started buying cryptocurrencies is to try to hedge against skyrocketing inflation. But Fitzpatrick believes bitcoin is now seen as more than just a hedge against inflation. “It has already crossed the chasm to become mainstream,” she said. 

“Two years ago the funds thought bitcoin was a crazy idea, a year ago they wanted to discuss it later, today they are increasingly worried that they will lose clients if they don’t invest in bitcoin,” James Butterfill, investment strategist for digital asset investment platform CoinShares, told Coin Telegraph. 

How much will bitcoin be worth in 2022

Bitcoin could surpass $100,000 next year and Ethereum could be worth $10,000 in the first half of 2022, Aton analyst Valentin Rodionov told Forbes. On Dec. 14, they were trading at $47,500 and $3830, respectively. The final stage of growth in this cycle is close, when the price can grow above these marks, after which we should expect a correction of more than 50%, according to Aton. “This is indicated by the last couple of months, in which long-term investors reduced their positions, and this trend may last for several more months,” Rodionov said.

What else will affect cryptocurrency in 2022?

Hacker attacks

One of the main risks for cryptocurrency in 2022 is an increase in hacker attacks, said Rustam Botashev, portfolio manager at crypto investment bank Hash CIB.

Five of the 10 largest cryptocurrency thefts of all time occurred in 2021, CNN wrote, citing Comparitech. This included the largest in the history of the decentralized finance market. In August, an anonymous hacker stole about $600 million in cryptocurrency from financial platform Poly Network. The last successful hacker attack happened in early December – at least $150 million was stolen from “hot wallets” (accounts with a permanent connection to the Internet) of two depositors of the Bitmart cryptocurrency exchange. In all, hackers orchestrated 169 blockchain hacks worth nearly $7 billion in 2021. 

This may not be the limit – next year, Qredo Protocol Product and Technology Director Benjamin Whitby foresees the world’s first $1 billion hack. In 2022, state-sponsored hacker groups will organize more attacks that will target crypto-assets, according to a report from Kaspersky Lab. The main targets of attackers will be the collection of private wallet keys, credentials and verification codes, said Binance Eastern Europe director Gleb Kostarev.

The insurance company Lloyd’s of London caught the trend with the activity of hackers and in early December it changed the terms of its policies, excluding from the insurance coverage damage from cyberwar or cyberterrorism.

Wars in the metauniverses

In 2022 there will be a “race of metac universes”. For example, Facebook, which changed its name to Meta, announced the construction of them. 

In meta-universes, you can create your own avatars, play and buy “skins” – clothes for the avatars. But first you have to buy “land.” Online companies already sell them to traditional companies. For example, auction house Sotheby’s bought a “plot” in the Decentraland meta-universe in June for £1.9 million ($2.5 million). The Sandbox universe sold part of its “land” to Adidas and rapper Snoop Dogg to replicate his real home there. Nike wants to build a Nikeland world in the Roblox universe.

“Expect a battle between metaclasses with cryptocurrency and metaclasses run by games and corporations like Meta,” Bitcoin Foundation chairman Brock Pierce told Business Insider.

Because of this, tokens that are involved in building meta universes, such as Aavegotchi, which helps you create your own avatar to interact within one of its 16,000 “realms,” or Argentina’s Mana token, which is the digital currency of the Decentraland meta universe, suggest Egor Vinogradov, CEO of Sun Crypto Management.

The GameFi sector is booming

Investment company Grayscale predicts that by 2025, the proceeds of companies from construction of metaclasses will be $400 bln. Rustam Botashev believes that the play-to-earn sector, or GameFi, gets great prospects for growth. These are playgrounds with their own internal settlements in tokens, on which you can earn, for example, by winning competitions or selling “game assets,” lending tokens and getting profit from the borrowers’ winnings.

The market already has successful examples. Since its release in 2017, the Mana token of the Decentraland meta-universe has risen in value by more than 12,000%. And it started growing this year, after several companies, including Facebook, announced their plans to develop meta-universes. The game Axie Infinity appeared in 2018, already in November of this year NFT sales in “its territory” passed $3 billion.

While this market is still in its infancy, it has great potential, Botashev says. Nikita Ivchenko, head of 8848 Invest investment department agrees with him: the value of tokens from meta-village projects will grow due to transactions inside game spaces.

Contacts with the government will intensify 

In the US, the Securities and Exchange Commission has been trying to figure out how to control the decentralized finance market and cryptocurrency settlement flows all year 2021. For now, it’s all in a gray area in the U.S., and cryptocurrency transaction companies won’t have to report to the U.S. IRS until 2024 at the earliest.

But it is possible that the U.S. could approve cryptocurrency regulations as early as 2022, American Forbes quoted Bloomberg Intelligence senior strategist Mike McGlone as saying. 

Some cryptocurrency projects have already expressed a willingness to work with financial regulators in the U.S. and other countries. These include payment platforms Circle and Paxos Dollar. Circle told the US Department in December that its tokens are backed by real assets – cash and U.S. Treasury bonds. And Paxos Dollar announced in early December that it will integrate its infrastructure into Latin America’s largest financial company, Mercado Libre, which will allow 200 million Brazilians to buy and sell cryptocurrency from 1 real (about $0.18).

El Salvador this year became the first country to legalize bitcoin. By the end of 2022, there will be six such countries – including Brazil and the Philippines, said BitMEX Crypto Exchange CEO Alexander Heptner.